What Does a Harris/Trump Showdown Mean for Banks?

Just as the athletes of the Paris Olympic Games prepare to step into the global spotlight, a race of a decidedly different kind just got a lot more interesting. Move over Katie, enter Kamala. President Joe Biden’s historic withdrawal from the fast-approaching 2024 presidential election has set the stage for a hotly contested battle between Vice President Kamala Harris, the presumptive Democratic candidate, and Republican nominee Donald Trump. What would a win for either candidate mean for the financial industry? With just 103 days until election day, we provide a quick look at potential impacts on regulation, the economy, and the markets. 

Regulation 

Trump: Trump’s approach to regulation has been characterized by a strong deregulatory stance aimed at reducing compliance costs and boosting profitability for banks and other industries. His policies favor a hands-off approach, which he believes will stimulate economic growth by allowing businesses more freedom to operate. 

Harris: Many expect Harris to maintain and potentially expand the regulatory framework of the Biden administration. She believes stricter oversight will protect consumers and enhance financial stability, and as a Senator sponsored legislation that would have made it easier for states to prosecute bankers and subpoena bank records. Her record as California Attorney General includes facilitating a multibillion-dollar settlement with banks over lending and foreclosure practices, but she’s also considered friendlier to businesses than many Democrats. 

The Economy 

Trump: Trump’s economic policies focus on reducing taxes, particularly for corporations and high-income individuals, to spur growth. He plans to lower the corporate tax rate to as low as 15% to encourage investment and economic expansion. However, some economists say his protectionist trade policies, including high tariffs on imports, will increase inflation. 

Harris: It is anticipated that Harris will emphasize the need for infrastructure development and repair and domestic wage and job growth. She will likely prioritize progressive economic policies, such as investments in green energy.

The Markets 

Trump: Trump’s policies can be perceived as favorable to the stock market, particularly for sectors expected to benefit from deregulation and tax cuts. However, his unpredictability and aggressive trade policies could introduce significant market volatility. Some investors also recall that Trump’s trade wars led to recessions in key manufacturing sectors, adding to concerns about potential instability. 

Harris: Harris’ expected continuation of Biden’s policies is seen as providing more stability for the markets, albeit with less immediate enthusiasm from investors compared to Trump’s deregulation promises. Some caution that a Harris candidacy, and in theory a more competitive election, could bring more short-term market unpredictability as investors reassess the so-called “Trump trade.”

“The most important and inevitable market consequence of a U.S. election that has suddenly become more competitive is a big increase in uncertainty about the outcome, which will probably persist all the way until the polls close on November 5,” Anatole Kaletsky, co-founder and chief economist of investment advisory firm Gavekal, told CBS News.