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  • Writer's pictureRealFacts Editorial Team

The Potential Market Effects of This Year’s Election

Joe Biden and Donald Trump

Markets can be rather volatile and unpredictable during an election year, especially one with a race that could go either way. The JPMorgan global equity team wrote, “The fact that such a high-stake election cannot be called at this point in time should be some cause of concern for equity investors looking to manage exposure to key US policy themes,” The main cause of the uncertainty is the wide gap between the financial policies of the two candidates. Both of which could be bad for markets.

Trump’s potential policies could be rough for emerging markets as in the past his trade policies have been more domestically protectionist, with tariffs mostly imposed on Chinese imports. Joseph Adinolfi of MarketWatch wrote, “Trump has floated the notion of imposing tariffs of 60% or more on all Chinese goods entering the U.S., as well as a 10% universal tariff on all other U.S. trading partners, and a 100% tariff on Chinese cars manufactured in Mexico.” 

Biden’s potential policies would include a hefty tax raise for individuals and corporations. Adinolfi wrote, “Some tax policies under consideration by Democrats include raising the corporate tax rate to 28% from 21% presently, imposing a 15% minimum tax on corporations earning more than $1 billion over the past three years, raising the current buyback tax from 1% to 4%, raising the top marginal tax rate to 39.6%, imposing a 25% wealth tax on total income, including unrealized capital gains, of $100 million or more, and closing the carried-interest loophole by taxing capital gains as ordinary income for those earning more than $1 million.”

Investors are going to have to be smart and adhere to strict risk management principles in the coming months due to increased uncertainty and volatility in capital markets going into the election.

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