Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


What could a Democratic clean sweep bring for US equities?

Preston Caldwell  |  03 Nov 2020Text size  Decrease  Increase  |  
Email to Friend

Days before the election, the Democrats stand a solid chance of achieving a clean sweep, with Joe Biden winning the presidency and the Democrats recapturing the Senate. Regardless of the exact probability of this event, we think this is the top election outcome that investors should be focusing on, as a Donald Trump win would preserve the status quo and a Biden win without a Democratic Senate would bring legislative gridlock. Biden's platform proposes trillions of dollars of new spending on clean energy, infrastructure, healthcare, education, and other areas.

However, the degree to which these plans can be enacted is highly contingent on the size of a future Senate Democratic majority, as a slim Democratic majority will struggle to coalesce around more sweeping changes.

Furthermore, even assuming a large majority (five-plus seats), we don't think the increase in taxes or spending will push the US to unusually high levels by historical standards. As such, our US GDP forecasts aren't substantially affected by the election outcome.

However, US equities are likely to see a modest negative impact from higher corporate taxes, which could reduce aggregate after-tax earnings on the order of 5 to 10 per cent. Of course, specific companies or sectors could see outsized impact from newly enacted policies.

Read our comprehensive report on the implications of a Demorcratic win

Morningstar's Global Best Ideas list is out now. Morningstar Premium subscribers can view the list here.

See also Morningstar Guide to International Investing.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

is an equity analyst for Morningstar.

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend