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In September the Dow declined (0.90%) and remains in negative territory for year at (0.35%), the S&P 500 declined (3.92%) with a year-to-date gain of 4.09%, and the NASDAQ declined (1.43%) but remains positive Year-To- Date 25.83%.

Since we are in the final month prior to the Presidential Election, we decided to flesh out Five Policy Debates that May Impact Markets. Since this is a MarketWatch we will not discuss social issues. The stakes are always high for elections. However, the stakes for the 2020 election feel much higher than usual due to the global pandemic, economic pain, and social unrest. With such an unprecedented election occurring at a time of great divisiveness in the country, we highlight five policies where Democrats and Republicans are the most diametrically opposed – and how those policies could impact the market.

Taxes – Biden: calling for higher taxes for high wage earners and corporations. His plan would raise the tax rate on high earners back to 39.6%, tax capital gains at the same rates as ordinary income and increase the corporate tax rate from 21% to 28%. Possible Market Impact: Higher taxes could curtail earnings growth, as after tax cash flows would be reduced.

Trump: lower taxes are expected to remain a focal point in his re-election bid. In May, White House economic adviser Larry Kudlow floated the idea of a 50% discount to the corporate tax rate for firms that bring their operations back from other countries. Additionally, in August Kudlow and Treasury Secretary Steven Mnuchin informed the media that Trump favored cutting income and capital gains tax rates. Lower taxes at the corporate and consumer level may spur consumption and economic growth, and benefit firms with high effective tax rates.

Trade/Foreign Policy: Biden’s platform theme of “Build Back Better” features policies to “Buy American.” However, Biden is still likely to adopt a more globalist worldview than Trump – potentially removing some of the tariffs the Trump administration placed on imported goods. With Biden likely maintaining better relations with the World Trade Organization, the potential exists for more global trade alliances and the re-negotiation of the Trans Pacific Partnership. These actions would likely be positive for global growth, most specifically in regions impacted by current tariffs.

Trump: Trade policy under a Trump second term will likely be consistent with his first term. Tariffs and bi-lateral trade agreements will likely be the main tools, along with hawkish rhetoric. Trump may move beyond additional sanctions on China. Trump’s “America First” ideology on trade is likely to benefit more domestically-oriented market segments.

Clean Energy/Infrastructure: As part Biden’s “Build Back Better” plan; he will focus on investing in modern and sustainable infrastructure to encourage clean energy. He has pledged to spend more than $2 trillion to achieve carbon neutrality within the US power sector by 2035. Biden also will seek to shift behaviors toward electric vehicles and public transportation, calling for 500,000 electric vehicle charging stations to be installed nationwide. Regulations on natural resource production are likely to come back as well (i.e., the Paris Climate Agreement). All told, firms focused on renewables and intelligent infrastructure may benefit.

Trump: The Trump administration would likely continue to loosen environmental regulation. Like Biden, Trump has discussed additional infrastructure spending as a way to create jobs and foster economic growth. However, the Trump plan emphasizes rebuilding airlines, highways, railroads, and bridges, with little support for clean energy. Trump’s focus on more traditional infrastructure spending may lead to higher commodity prices as demand for natural resources increases, and potentially benefit those producers.

Health Care: The centerpiece of Joe Biden’s health care reform is creating a public option for Medicare and expanding the Affordable Care Act. His health care agenda also centers on COVID-19 pandemic responses, such as supporting US production of personal protective equipment, novel treatments and other medical devices. All measures may be beneficial to device and novel medicine makers.

Trump: Continuing on his current path, Trump likely would focus on further repealing parts, or all, of the Affordable Care Act. There has been no mention of a change in COVID-19 response policies. And while the president has made frequent comments on drug pricing, he has been unable to have any sweeping policy changes with only a recent executive order impacting Medicare drug prices. Overall, a Trump administration may be slightly more beneficial for the broader health care sector as a whole given the lower headline risk from drastic health care policy changes with respect to universal health care and drug pricing protocols.

Technology/Antitrust: Both the Trump administration and the Democrats have advocated for more technology oversight, particularly with respect to data privacy concerns and social media behavior. But differences exist when it comes to regulation.

Biden: On the campaign trail during the primaries, Biden criticized the current antitrust process. Along with running mate Senator Kamala Harris, a Biden administration may enforce stricter antirust regulation. The Democratic Party, in the aggregate, has been in staunch support of this regulation, adding to the potential for a more stringent stance that could hamper large tech-related firms.

Trump: The Trump administration over the past few years has favored more deregulation of the tech sector, via the rolling back of net neutrality and broadband privacy rules. A second term would likely continue the trend of loosening regulation. Because his first term antitrust actions have primarily been centered on televised hearings of tech CEOs appearing before Congress, a second term may leave big tech alone, meaning minimal headline risks.

While these five policies are most likely to drive markets, a non-policy issue also may move markets. The results on election night may not be known for weeks or contested, given the unprecedented nature of voting during the pandemic. If this does occur, investors girding for gridlock may look to the 2000 election where the president was decided 36 days after the election for insight into market behavior. Back then, at the turn of the new millennium, gold and long-term Treasuries rallied as the Florida hanging chads were counted.

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