With the U.S. presidential election on November 5, 2024, global investors are watching closely as the outcome is likely to move markets. The two frontrunners—Republican Donald Trump and Democrat Kamala Harris—each propose vastly different policies that could reshape the economic landscape.

Trump vs Harris Policies 

Trump aims to reduce corporate tax rates from 21% to 15% and renew the pro-business tax cuts enacted in 2017 which reshaped the U.S. tax system, benefiting individuals and corporations. On the other hand, Harris holds the view of increasing taxes for high earners, maintaining cuts for middle-income groups, while raising corporate tax to 28%. 

In regards to trade policies, Trump may impose a 10-20% tariff on all U.S. imports and further tax levies on Chinese-made goods which similarly took place back during his presidency period. This could incite some pressure on imported inflation. It is expected that Kamala Harris will go tough on China by continuing Biden’s tougher tariffs on Chinese imports which took place this year. 

Sectoral Impacts

A Harris administration could benefit renewable energy, electric vehicles, and related sectors, given her positive stance on clean energy. Alternatively, sectors with heavy exposure to China under Trump’s administration such as basic materials and semiconductor could face disruptions if trade tensions escalate. Trump’s pro-domestic energy policies may favor oil, natural gas, and traditional energy companies. However, his stance on reversing current EV policies could present headwinds for electric vehicle makers.

Simpan Views

Although domestic markets  may not be directly affected by the U.S. election, we believe the Rupiah could strengthen against the U.S. dollar if Trump wins, due to his ‘America-first’ growth and other deficit-widening policies. Within growth environments, currencies tend to depreciate as money supply expands and inflation rises. In turn, a weaker dollar could drive flows into emerging markets. On the other hand, Democrats’ relatively prudent policies may maintain the dollar’s status quo. However, both candidates’ policies will have one common risk, a widening US budget deficits. This implication creates risks to the overall global market, strength of the US dollar, and re-inflation risks.

With the debt ceiling suspended until January 2025, there could be added risk to the global market  if the US$31.4 trillion ceiling is breached. The US debt currently stands at US$35.5 trillion and raising the debt limit would raise alarming implications to the US economy, dollar and ultimately, global flows. We believe that raising the ceiling could be the best option despite repercussions as the global economy would depend on it to avoid a potentially major crisis. 

Portfolio Positioning 

Investors should stay focused on long-term objectives amidst the global uncertainty. Staying diversified and monitoring key sectors could offer a buffer against potential volatility. We are optimistic with our equity sector picks such as metal commodities, financial services and fossil energy with the rate cuts cycle remaining as the global markets’ theme. Our Balanced fund offers an exposure to the sectors’ returns while balancing the risks with fixed income, while the Sustainable Equity Fund offer its full equity returns.