Prediction: Election Day Will Represent an Ominous Turning Point for Wall Street

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In just three days, Americans will head to the polls or mail in their ballots to determine which presidential candidate — current vice president and Democratic presidential nominee Kamala Harris, or former president and Republican presidential nominee Donald Trump — will lead our great nation over the next four years.

Considering that all three major stock market indexes, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), broad-based S&P 500 (SNPINDEX: ^GSPC), and growth-stock-propelled Nasdaq Composite (NASDAQINDEX: ^IXIC), have ascended to multiple record highs in 2024, all eyes are on this highly contested presidential race.

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While each candidate brings unanswered questions to the table (and it’s no secret that Wall Street dislikes uncertainty), a potentially bigger issue looms larger for stocks.

Vice president and Democratic presidential nominee Kamala Harris speaking with reporters. Image source: Official White House Photo by Lawrence Jackson.

Let me preface this discussion by pointing out that campaign promises aren’t always put into action. If the winner on Nov. 5 faces a divided Congress, it’s unlikely they’ll be able to implement many of the policies they’ve proposed while on the campaign trail.

With the above being said, there are proposals on both sides of the political aisle that are cause for concern on Wall Street.

For example, Harris has proposed tackling America’s rapidly rising national debt by increasing taxation on select groups. More specifically, Harris wants to quadruple the share buyback tax for public companies from 1% to 4%, increase the ordinary capital gains tax from 20% to 28%, and lift the peak corporate tax rate by a third, from a historically low 21% to 28%.

While all of these actions would raise federal revenue, they also have the potential to adversely impact the stock market. Buybacks have been an especially useful tool America’s biggest publicly traded companies have used to reward investors and boost their earnings per share (EPS). Apple has reduced its outstanding share count by more than 42% since the start of 2013, which has had a notably positive impact on its EPS.

Meanwhile, Trump wants to impose tariffs on U.S. imports as a way of encouraging domestic production. Tariffs for Chinese products imported into the U.S. would hit 60%, with a 20% tariff on imports from other countries, according to Trump.

The problem with tariffs is they have the potential to spark a trade war, which can increase prices domestically and hamper supply chains. Tariffs can be a mixed bag when it comes to corporate profits.

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