October 21, 2016
As the 2016 political campaign marathon nears Election Day on Nov. 8, investors have started to assess the implications beyond the vote. Naturally, the bulk of the nation’s attention is focused on the presidential race, where Republican Donald Trump and Democrat Hillary Clinton are vying to become the country’s leader.
Yet the ultimate effectiveness of any president stems in part from his or her relationship with the senators and representatives who comprise the legislative arm of Washington’s power structure.
Effects of a Sweep by Either Party
While the prospects of four more years of a divided government are unappealing for many, the alternative might strain your portfolio.
Andy Laperriere, head of U.S. policy research for Cornerstone Macro, suggests that a Trump win would likely mean Republican leadership across the board because Congress is expected to remain in the party’s hands.
This domination could result in the implementation of at least part of the economic agenda proposed by Republican Speaker of the House Paul Ryan, as well as the adoption of more traditional Republican initiatives around energy and defense.
Still, Laperriere says, a Trump presidency may be unsettling for the markets, which don’t respond well to uncertainty.
“I think the one area where Trump has real conviction is trade, and investors ought to take him seriously on that,” he says. “Beyond that, he’s unpredictable.”
On the other side of the aisle, in the unlikely event of a Democrat sweep, concerns would arise immediately in the financial, healthcare and energy sectors, Laperriere says. Furthermore, growth outlooks would fade beneath the overlay of likely higher taxes — particularly on corporations, investment income and individuals — and expectations of a higher minimum wage and more regulations.