As one of the World’s largest economies, the outcome of the US Presidential election is likely to have wider implications for global markets and international investors. When Americans go to the ballot box on Tuesday 5 November, they will be voting for two very contrasting Presidential hopefuls.
This is why in the run up to the election, predicting the implications of a Donald Trump or Kamala Harris win is such a challenge. Both have very different policies that will impact the US, but could also indirectly extend much further abroad.
To help you understand the possible implications of a Trump or Harris win , AFH’s Chief Economist Colin Warren is sharing his thoughts this week. In his series of five blogs, he is considering each Whitehouse hopeful’s proposed policies on trade and taxation, and how they could shape the wider financial markets.
Today, the third instalment of the series, Colin looks at each Presidential candidate’s policy on immigration.
Kamala Harris is aiming to reform America’s immigration system
Broadly, the current Vice President would look to address the root causes of migration from Central America, while also reforming the immigration system. She supports putting more border agents in place to control illegal immigration, which is in complete contrast to Donald Trump.
The former President wants to focus on mass deportations of undocumented migrants who do not have the legal right to live or work in the US. He would also seek to make asylum claims more difficult.
A mass deportation programme would face considerable administrative and legal hurdles, but if implemented could have severe economic repercussions.
The deportation of undocumented workers could undermine the US economy
Estimates suggest that there are approximately 11 million undocumented immigrants residing in the US currently, with around 8 million of working age (about 5% of the labour force).
The loss of undocumented workers would have a large direct impact on industries such as agriculture, construction, and hospitality. Labour shortages could push up wages and prices in the most affected sectors.
Moreover, given the loss of spending and the fact that many illegal migrants also run their own businesses, employment of legal workers would also be hit. According to one estimate, mass deportation would reduce Gross Domestic Product (GDP) by 2.6%, or around US$5 trillion, over 10 years.
Government revenues would also suffer due to the loss of tax receipts, and house prices would presumably fall due to reduced demand.
A mass deportation of workers could create a volatile stock market
The financial market impact of mass deportation is probably more clearcut for equities than for bonds. The hit to economic activity and increased labour costs in certain sectors would likely weigh on corporate profits, hurting broad equity market performance.
However, while weaker GDP and safe-haven flows are likely to put downward pressure on US Treasury yields, upward pressure could arise because of cost-push inflation and a deterioration in the public finances.
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.
Thursday 24 October 2024