The White House is seen in Washington, DC on July 21, 2024.
Samuel Corum | AFP | Getty Images
Such a book, titled “What to Expect at Election Time,” could serve as an economic primer for a year full of possibilities.
This paper compares the policy platforms and summarizes their respective economic outlooks. It also covers expected market trends and tax and regulatory policy frameworks for the first year of the new presidential cycle. This guide presents macroeconomic and individual sector risk and reward potential.
Of course, things don’t always go according to plan.
Of course, external forces are also at play, ranging from the composition of a new Congress to unforeseen events beyond the control of America’s domestic leadership.
If such a guide were available, it would look something like this:
Republicans, led by presidential candidate Donald Trump, may seek to extend the Tax Cuts and Jobs Act of 2017. Further reduce corporate taxes Tariffs will be imposed on imports, but they will be raised from the current 21% to 15%.
Additionally, a second Trump administration could revoke various regulations enacted during the Biden administration. Clean Energy Incentives.
In the abstract, one could argue that lower taxes and deregulation are good for business. They would be favorable developments for Wall Street and therefore for financial markets.
But further unfunded tax cuts would increase the national deficit and debt. The U.S. debt-to-GDP ratio was 123% in 2015. 2023.
Outright tariffs would be inherently inflationary, economists argue, and could even spark a global trade war that would result in an economic downturn.
Former President Donald Trump is also a good candidate. Largest Mass Deportation of Immigrants Since the Eisenhower administration, there have been more job openings than workers in the United States. Latest Data From the Bureau of Labor Statistics.
A large reduction in the labor force will cause both inflation and recession, resulting in stagflation.
Observers are waiting for details of the tax plan to be announced by Vice President Kamala Harris, whom President Joe Biden endorsed as his successor when he dropped out of the presidential race. White House He calls for repealing the Trump tax cuts and restoring the top marginal income tax rate to the 39.6% rate that was in place before the Tax Cuts and Jobs Act of 2017. He also advocates raising the corporate tax rate to 28%.
Wall Street will not be enthralled by the announcement.
A tougher regulatory regime is also expected to be rolled out, something that US companies have complained about throughout the Biden administration.
Biden further added: Long-term capital gains and eligible dividends will be 44.6%. Currently, the tax rate is 20 percent, with an additional 3.8 percent net investment income tax on high-income earners, and it would require billionaires to pay at least 25 percent of their income in taxes.
Some would argue that this series of tax hikes in a weakening economy could lead to a recession, even if the Federal Reserve continues to ease interest rates.
Given that the first year of a presidential election cycle is historically the toughest for the stock market, our guide might suggest taking profits early. This will be true regardless of who is next in the White House, and could be a hedge against unexpected events, such as major policy changes.
The past two years have been fairly profitable for stock market investors, despite the complete lack of predictability about what would happen as we emerged from pandemic-related stay-at-home orders.
But now is the time to plan for the near future, and it’s a good time to set aside a rainy day fund in case the costs of a new administration turn out to be higher than expected.
In fact, 2025 may become known as “The Year of Living with Anxiety,” a potential new reality that will be addressed in the sequel to our guide, “What to Expect in Your First Year.”
— CNBC contributor Ron Insana iFi.AI, an artificial intelligence fintech company.
