In presidential election years, investors are often reluctant to make large portfolio changes until there is clarity on who will win. This year, the contrast between the two candidates is so large on almost every issue that the effect on the stock market could be dramatic.
Below is an analysis of the bull and bear cases for each candidate. We’ve attempted to summarize the potential market perceptions, both bull and bear, based on the candidates’ stated views on a number of economic issues.
Post-election stock markets
We took a look at the year immediately following each presidential election from 1900-2008.*
Clinton
Bull: Incumbent party wins +15.1%
Bear: Democrat wins +3.9%
Trump
Bull: Republican wins +10.3%
Bear: Incumbent party loses -4.4%
*Source: MFS Investment Management “Primaries, caucuses and elections–oh my!,” based on data from Ned Davis Research
The stock market favors the known versus the unknown
Clinton
Bull: Establishment candidate with ties to Wall Street
Bear: Extension of Obama policies that will continue to expand the national debt
Trump
Bull: Perception that he will bring real change to politics and upset the status quo
Bear: Wild card candidate who has done business with Wall Street
Taxes
Clinton
Bull: Tax increase on wealthy might increase collections, move toward a more balanced budget
Bear: Increase of estate tax and other progressive taxes on high earners that own stocks
Trump
Bull: Lower personal, corporate tax rates should stimulate economy
Bear: Trickle-down economics unproven to lift up the lower and middle classes
Immigration
Clinton
Bull: Continue to allow undocumented workers to provide needed labor
Bear: Globalist agenda not seen as working; uptick in social unrest
Trump
Bull: Strong nationalist policies, wants to bring manufacturing back to U.S.
Bear: Alienating a huge segment of U.S. workforce and large trade partner; deporting millions of undocumented workers will be a huge cost
Healthcare
Clinton
Bull: Move to single payer option will reduce overall premiums
Bear: Affordable Care Act losing providers as premiums continue to rise
Trump
Bull: Repeal Affordable Care Act; allowing sales across state lines will increase competition and lower premiums
Bear: Long, nasty fight to remove Affordable Care Act will mirror the uncertainty experienced when law was passed
Economic Policies
Clinton
Bull: Tax benefit for corporate profit sharing
Bear: Increased minimum wage will hurt small business growth
Trump
Bull: One-time 10% tax on foreign corporate earnings will bring back billions into U.S. economy
Bear: Potential currency war by declaring China a currency manipulator
