Finance and Investment News on September 10 (Editor Huang Junzhi): With less than two months to go until the US presidential election on November 5th, the election results will have different impacts on the US stock market. Prior to the final showdown, Vice President Kamala Harris and former President Donald Trump will kick off a "debate duel" on Tuesday evening (10th) Eastern Time, giving investors a glimpse of what to expect.

For Wall Street, this debate may add another layer of volatility amid uncertainty in the job market, interest rates, and geopolitics. The S&P 500 Index just experienced its worst week since March 2023, and another disappointing US employment report has once again sparked concerns about a cooling economy.

From the perspective of policy views on taxation, trade, tariffs, and immigration, here are the issues that investors will be paying attention to in the debate:

Taxation: Trump has stated that he will reduce the corporate tax rate from the current 21% to 15% and vowed to make the 2017 tax reform permanent, urging updates to key parts of the law. Meanwhile, Harris is pushing to increase the corporate tax rate to 28%. She proposes keeping the tax rate unchanged for those with incomes below 0.4 million USD while increasing taxes on higher-income individuals.

Trade and Tariffs: Trump mentioned imposing a 10% tariff across the board. Harris commented that this is equivalent to imposing a nationwide sales tax on everyday goods and necessities imported into the United States, which means an increased burden on the daily lives of Americans.

Immigration: Trump has stated that he will directly deport undocumented immigrants. Harris expressed support for an immigration agreement that includes the construction of additional border walls. Meanwhile, the Democratic Party has closed the US-Mexico border and rejected some asylum applications. A strategist from JPMorgan said that any effective measures to restrict immigration that result in severe labor shortages could become a potential driver of inflation and suppress economic growth.

Stock market in an election year

In election years, it is usually favorable for the US stock market. Since 1960, the S&P 500 index has risen in almost every election year. The only exceptions were in 2000 and 2008, which were affected by the bursting of the internet bubble and the financial crisis, respectively.

In the recent election cycles, this record looks even better. In the three election years since 2008 - 2012, 2016, 2020, the S&P 500 index has risen by at least 10%.

Looking from a narrower perspective, focusing only on the last seven months of election years would yield similar results. According to the data and analysis from Stock Trader's Almanac, the S&P 500 index has risen 16 out of 18 times during this period since 1950 in presidential elections. Only 2000 and 2008 were exceptions.

How does the election structure affect the US stock market?

Harris Wins

Harris's victory is expected to benefit a range of industries, including renewable energy companies, electric vehicle manufacturers, and even utilities.

Specifically, the Democratic Party's positive stance on clean energy issues means that Harris's win is good news for electric vehicle manufacturers such as Tesla, Rivian, and Lucid, electric vehicle charging network operators like ChargePoint Holdings Inc., Beam Global, Blink Charging Co., as well as suppliers and battery manufacturers.

Solar stocks, which include First Solar Inc., Sunrun Inc., and Enphase Energy Inc., are also expected to perform better under Harris's leadership because Democrats support renewable energy.

Homebuilders may also get a boost. Harris proposes providing up to $0.025 million in down payment support for first-time homebuyers, and suggests offering tax incentives for builders constructing their first homes. She also calls for the establishment of a $40 billion innovation fund to stimulate innovation in housing construction. Stocks such as DR Horton Inc., Lennar Corp., and KB Home may benefit.

The financial industry may not see improvement as the Harris administration is expected to continue strict regulation, imposing higher capital requirements on banks such as Bank of America, JPMorgan, and Goldman Sachs, and credit card fees will continue to be under pressure. Pharmaceutical companies may also face regulatory pressures as Harris proposes setting an annual limit of $2,000 on out-of-pocket costs for prescription drugs.

Trump wins.

Companies with significant exposure to China's high-income market may face disruption if trade tensions escalate. Some notable companies include chip manufacturers such as Nvidia, Broadcom, Qualcomm, material companies like Air Products and Chemicals Inc. and Celanese Corp., auto companies like Tesla and BorgWarner Inc., as well as industrial companies like Otis Worldwide Corp.

Oil, natural gas, and traditional energy companies are seen as potential beneficiaries if Trump wins as he pledged to lift restrictions on domestic oil production. Stocks to watch include Baker Hughes Co., Exxon Mobil Corporation, ConocoPhillips, Occidental Petroleum Corporation, Williams Companies, Halliburton Co., Devon Energy Corporation, Chevron Corporation.

Clean energy and electric vehicle companies that benefited from Biden's Infrastructure Investment Bill are expected to face challenges during Trump's presidency as he expressed his intention to overturn Biden's electric vehicle policies. Companies at risk if Trump cancels tax credits for buyers include Tesla, Rivian, Lucid, as well as battery manufacturers and component suppliers.

Defense stocks are expected to perform better under a Republican victory as defense spending is anticipated to be a clear priority for the party. Stocks to watch include aerospace manufacturers Lockheed Martin Corporation, US multinational aerospace and defense technology company Northrop Grumman Corporation, and RTX Corporation.

Similarly, stocks in prison companies like GEO Group Inc. and CoreCivic Inc. may rise as strict immigration policies will benefit operators of correctional facilities. Stocks of firearm manufacturers such as Smith & Wesson Brands Inc. and Sturm Ruger & Co. Inc. also tend to rise with Republican wins.

Cryptocurrency stocks have recently been seen as representatives of the 'Trump trade' because the former president's attitude towards bitcoin and other digital assets has undergone a major shift since his campaign, even promising to make the United States the 'crypto capital of the world'. Notable stocks include Coinbase Global Inc., Marathon Digital Holdings Inc., Riot Platforms Inc., Cleanspark Inc., MicroStrategy Inc., Cipher Mining Inc., and the Bitwise Crypto Industry Innovators ETF.