Election shockwaves: How the U.S. vote could shake up the financial markets

With the U.S. elections around the corner, both a Donald Trump or Kamala Harris presidency could significantly impact financial markets across the U.S. and the UK. If elected, Harris would likely stay the course with President Biden’s policies, emphasising green energy initiatives and increasing taxes on corporations and high-income earners. In contrast, a Trump administration could attract investors through deregulation and tax cuts, but risks a potential trade war.

For those seeking policy stability, Harris’ platform mirrors Biden’s in key areas- continuing his stance on tariffs, environmental goals, and corporate tax increases for the wealthy. One key issue on her agenda is the fate of the 2018 tax cuts, many of which expire in 2025. Harris would likely extend these cuts for middle-income earners while rolling them back for higher-income individuals

On the flip side, if Trump returns to office, expect a strong push to make the 2018 tax cuts permanent, particularly for high earners. He’s also set on lowering the corporate tax rate from 21% to 15%. Additionally, Trump would focus on deregulation, especially in financial services and energy, and may adopt a business-first approach to antitrust policies.

Trade policy could be a significant area of concern under Trump. He has signaled intentions to raise tariffs on Chinese imports to 60%, which could inflame trade tensions and bring market volatility. He has even proposed tariffs on goods from U.S. allies, potentially straining international relations. Harris, by contrast, would likely continue Biden’s more measured trade approach, maintaining tariffs but avoiding extreme measures that could disrupt global markets.

While Trump's deregulatory stance might excite equity investors, his trade policies and potential moves on immigration could fuel inflation, possibly leading to tighter monetary controls. Harris, offering a steadier hand, would likely bring more stability to trade and economic policies, avoiding global trade conflicts.

Ultimately, the U.S. election will send ripples through the UK’s financial markets, as shifts in fiscal and trade policies across the pond have far-reaching effects. Investors in both the U.S. and UK will be watching closely to gauge potential opportunities—and risks—depending on the election outcome.