Barclays: Impact of 2024 Election on US Equities
Barclays analysts predict that the 2024 US election will likely result in a divided government. They expect Democrats to win the House and Republicans to control the Senate. This split in power is anticipated to create a legislative gridlock, making significant changes to fiscal policies difficult.
Corporate Tax Rate to Stay Around 21%
The corporate tax rate is likely to remain at 21%. Barclays noted, "A unified Democratic government would likely seek to raise corporate taxes, though we view a 'blue wave' as the least likely outcome." On the other hand, a "red wave" that aims to cut corporate taxes further faces challenges related to budget concerns.
Trade Policies: Potential Changes Under Trump
If former President Trump is re-elected, there could be significant shifts in trade policies. Barclays warned, "Former President Trump's election could present the risk of higher tariffs." These tariffs might trigger retaliatory measures from other countries. For instance, proposed Trump tariffs could reduce earnings by 2.6%, and additional retaliatory tariffs could cut earnings by another 1.2%.
Impact on Inflation Reduction Act (IRA)
The Inflation Reduction Act (IRA) could face changes under a second Trump term, particularly affecting clean energy sectors. Barclays explained, "Clean energy beneficiaries of IRA tax incentives could face headwinds under a second Trump term." Conversely, companies dependent on fossil fuels could benefit from such shifts.
Barclays Summary
Barclays summarized the situation by stating, "Corp taxes at the lower bound could be a LSI tailwind to SPX EPS and a bigger headwind if raised, but both unlikely." The most likely scenario, according to the bank, is that Congress will remain split between Democrats and Republicans, regardless of whether President Biden or former President Trump is elected.
This summary simplifies the potential impacts of the upcoming 2024 election on US equities, focusing on key aspects like corporate tax rates, trade policies, and energy sectors, in easy-to-understand language and examples.
