With the American Presidential election just over a week away, you might be wondering what the implications of a Donald Trump or Kamala Harris win might be on the economic world. As a leading global economy, the outcome of the US elections could have far-reaching implications for international financial markets.
Yet the main policy proposals of both Presidential candidates are sharply contrasting, meaning the potential implications on the international financial markets are also very different. To help you understand what these influences might be for both the US and global economy AFH’s Chief Economist Colin Warren is producing a series of insightful blogs.
The week-long series of blogs looks at the policies of at each Whitehouse hopeful on tax, trade, regulation, immigration, and what they might mean for the world of finance. Today, on day four of the series, Colin focuses on regulation.
Broadly speaking, Harris wants interventionism while Trump wants deregulation
When it comes to the general area of government regulation, a Harris administration can be expected to adopt a more interventionist approach. Trump’s instincts, on the other hand, would be to deregulate.
If elected, Trump has indicated that he would set up a ‘government efficiency commission’ led by the technology entrepreneur Elon Musk to cut back unnecessary public spending and reduce government regulations.
According to Goldman Sachs, several sectors could benefit from Trump’s drive for deregulation. The oil and gas sector could benefit from a descaling of environmental regulations, while a bid to reduce the powers of financial regulators and make capital/liquidity requirements less onerous will be welcomed by the financial sector.
In contrast to Trump, Harris is likely to maintain a strong focus on climate change and the promotion of renewable energy sources. However, more recently she has sounded more supportive of the oil and gas sector (no doubt in a bid to broaden her electoral appeal in key ‘swing states’ such as Pennsylvania, as well as fostering energy security).
Tackling consumer exploitation could foster innovation within America
With many Americans still struggling with the cost of living, Harris has pledged to ban so-called ‘price gouging’ (where companies exploit supply shortages to rip off consumers) in the food/grocery sector. She also plans to negotiate with big pharmaceutical companies to lower drug prices.
Government attempts to control prices are generally not favoured by conventional economists, as they can distort markets, lead to shortages, and reduce investment. Cracking down on anti-competitive practices should foster innovation and be good news for growth and inflation.
But formal price controls could jeopardise the efficient allocation of resources across the economy, which could ultimately stifle economic growth. Much will depend on how policies are implemented, but profit margins in targeted sectors could potentially be hit.
Get in touch
If you would like to understand how the outcome of the US elections may affect your investments, or discuss your wider wealth more generally, AFH are happy to help.
As one of the UK’s largest independent financial advice companies, our experienced and knowledgeable experts will explain the best options for you in an understandable, jargon-free way, so that you can make more informed decisions. Either contact your existing AFH adviser or call us on 0333 010 0008 to arrange a consultation.
Friday 25 October 2024