A possible “blue wave” in the November elections—transferring the presidency and Senate control to Democrats—would likely alter policies on taxes, tariffs and regulations in ways that would shift stock market winners and losers. In contrast, a second term for President Donald Trump could mean more ­deregulation and no tax increases, which could further boost certain stocks…and heightened trade wars, which could hurt others. Bottom Line Personal asked veteran economic and political analyst Greg Valliere about these scenarios and, depending on the winners, what’s most likely to happen that would affect your personal finances…

The Economy

No matter how the election goes, the coronavirus pandemic will continue to have major effects on the economy. And different approaches to ending the spread of COVID-19 will influence the course of the recovery. The outcome of the election also will affect the economy in various other ways.

Scenario: A Democratic sweep. Even if former Vice President Joe Biden is elected president and Democrats gain control of the Senate and retain a ­majority in the House, it would be difficult to achieve much of his economic agenda through new legislation. That’s because of a Senate rule that most legislation requires a 60-vote supermajority to end debate, which likely means some Republican support would be necessary. Democrats have discussed ending the filibuster rule but are unlikely to do so.

What Biden can’t achieve through legislation, however, he would try to make up for with executive orders. He would reverse many of Trump’s orders including those that have relaxed government oversight of businesses. 

Stimulus measures: Biden would propose legislation for spending $1 trillion to $1.5 trillion on infrastructure including repairing roads and bridges and expanding high-speed Internet access in rural communities. Many Republican senators like the idea of stimulating economic growth through infrastructure-related jobs rather than another round of enhanced unemployment benefits or stimulus checks. However, Republicans would drastically scale down Biden’s other ambitious spending proposals. Those include trillions of dollars in ­additional spending ranging from government purchases aimed at spurring US manufacturing to investments in clean-energy technologies. 

Taxes: Biden likely would attract enough Republican support to impose a mandatory 15% minimum tax on profits to stop large companies from using legal breaks to pay little or nothing. And he might be able to raise the top marginal income tax rate on individuals to 39.6% from 37%. But it’s unlikely, barring a filibuster change, that he could win enough support for other tax measures, including those that would repeal the $10,000 cap on deductions for state and local taxes…expand tax credits for many individuals…raise capital-gains taxes for many high-income earners and limit their deductions…or raise the corporate tax rate to 28% from 21%.

Foreign trade: Biden would drop the current 10% to 25% tariffs on steel and aluminum imports from ­European countries in exchange for an agreement by those countries to eliminate a 25% tariff on American goods including bourbon and motorcycles. Instead of unilaterally using tariffs to pressure China to increase purchases of American goods and respect US intellectual property rights, he would form a coalition with European and Asian trading partners that could coordinate threats of sanctions and tariffs on China to hopefully accomplish the same goals. 

Scenario: A Biden presidency and Republican Senate. Even if it’s a slim victory for Biden, the House is likely to remain under Democratic control. With a divided Congress, Biden would get bipartisan support for a more modest infrastructure bill—less than $1 trillion—but not enough support to impose the minimum tax on ­corporations. 

Scenario: A Trump second term. If Trump is reelected, Republicans would likely retain control of the Senate but Democrats would likely keep control of the House. In this gridlocked environment, Trump would be unable to pass most major legislation although he could continue to shape deregulation and trade policies through executive orders.

Stimulus measures: A bipartisan infrastructure bill under $1 trillion would be possible.

Taxes: House Democrats would block Trump’s attempts to extend the income tax cuts made in the 2017 Tax Cuts and Jobs Act set to expire in 2025, and ­further lower the corporate tax rate from 21%. 

Foreign trade: Trump would maintain existing tariffs on European countries and ratchet up those on China if it failed to follow through on its Phase One agreements to buy more US goods or if the US and China could not make progress on further trade agreements. 

The Stock Market

Scenario: A Democratic sweep. A sudden shift away from deregulation, from the lowering of taxes and from increases in defense spending would hurt some stocks, while higher spending on health care and clean energy would help others. 

Likely losers…

Defense manufacturers: A Biden victory would depress weapons sales. Congressional Democrats would eliminate annual increases to the Pentagon’s budget. 

Financial firms: Bank stocks would sink as Biden reverses Trump-era ­financial deregulation. Biden also would appoint officials who favor his more restrictive banking policies to run the Treasury Department and ­Consumer Financial Protection Bureau. 

Fossil-fuel energy companies: Biden would issue executive orders that would lower profits for oil, gas and coal companies, ranging from stricter standards for carbon emissions at refineries to a ban on new permits for drilling on federal lands. 

Likely winners…

Renewable energy companies: Expect Biden and the Democrats to add more subsidies that would benefit stocks of electric-car manufacturers and solar- and wind-power companies. 

Health-care providers: Stocks of health-care providers would get a boost as Biden, a champion of the Affordable Care Act from when he was vice president under President Barack Obama, widens its reach to include more consumers. However, pharmaceutical stocks would take a hit as Biden would likely expand on the Trump administration’s cap on drug prices. 

Scenario: Biden presidency and Republican Senate. With a Republican-controlled Senate, it would be more difficult for Biden to block increased defense spending and to increase spending on health care and clean energy, although executive orders and department appointments would benefit the latter two.

Scenario: Trump second term. Trump’s support for higher defense spending would benefit defense stocks. But his health-care and global-trade policies would generate volatility among others. 

Likely losers…

Health care: Trump’s attempts to weaken the Affordable Care Act, fight higher drug prices and reduce increases in government spending on Medicare and Medicaid would be a drag on the stocks of hospitals, pharmaceutical firms and many health-care providers. 

Multinational manufacturers: China and European countries would continue to retaliate against Trump’s tariffs. That could pressure the stocks of US agricultural and industrial manufacturers that depend on overseas sales for a large portion of their profits. 

Likely winner… 

Defense manufacturers: In addition to lower corporate taxes for various manufacturers, Trump would continue to push for higher defense spending.  

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