By Lewis Krauskopf
NEW YORK (Reuters) – Investors are grappling with the market implications of a possible presidential administration by Kamala Harris, which could pressure corporate profits through higher taxes while weighing on consumer staples and boosting solar energy.
Harris’ nomination is in focus this week at the Democratic convention after her late entry following President Joe Biden’s withdrawal tightened the race against Republican nominee Donald Trump.
Investors’ views of markets are typically shaped by factors such as the strength of the economy and the trajectory of interest rates, but the question of how a Harris-led White House might approach policy, regulation and taxation remains looming.
“She appears to be on track to be more aggressive than the Biden administration on many of these consumer issues that directly affect the market,” said Frank Kelly, senior policy strategist at investment firm DWS Group, citing Harris’ recent economic proposals and her record as a U.S. senator and California attorney general.
On Monday, Harris proposed raising the corporate tax rate from 21% to 28%, a plan her campaign described as a way to “ensure billionaires and big corporations pay their fair share.”
The plan contrasts with Trump’s record, which cut the corporate tax rate from 35% to 21% as president and seeks to make other tax breaks permanent.
According to the nonpartisan Committee for a Responsible Federal Budget, a higher tax rate would help reduce the U.S. budget deficit by $1 trillion over the next decade, addressing a problem that worries some investors.
Higher taxes could also weigh on corporate profits. Every percentage-point change in the statutory corporate tax rate is expected to change S&P 500 profits by just under 1%, according to Goldman Sachs strategists.
“Anything that reduces earnings should have a negative impact on the stock market,” said Peter Tuz, president of Chase Investment Counsel. However, “until the proposal is known, there could be several offsets.”
Most of the proposals from both candidates would require approval by Congress, which is split between Republicans and Democrats. Control of the House and Senate will be at stake on November 5.
Harris’ tax proposal could face serious obstacles in a divided or Republican-controlled Congress.
Harris and Trump are locked in a tight presidential race that will likely come down to a handful of key states, according to polls. Harris has taken the lead in recent weeks
on the political betting platform PredictIt.
FOOD, HEALTH, SOLAR ACTIONS
Rising expectations that Trump would beat Biden triggered what’s known as a “Trump trade” in U.S. stocks last month, lifting sectors of the market seen as benefiting from tax cuts and regulatory easing, including U.S. small-company stocks and cryptocurrencies.
Last week, Harris introduced a plan to ban price gouging on food and groceries, which her campaign says aims to…
