By Peter Bergman (MoneyAmped.com)
The forthcoming presidential election is being discussed more by executives of companies in the United States than it was four years ago. This is because the policies of candidates Kamala Harris and Donald Trump are very different from one another, which has led to worries over taxes, tariffs, and pricing effects.
An LSEG Workspace screen of S&P 500 firms revealed that during the earnings calls for the two months that ended on August 15, references to the “election” or the “White House” were 34% more often than they were during the same period last year. This information was gleaned from the conversations.
Main Topics for Discussion
According to a separate analysis by FactSet, while discussing the impact of “elections” in the second quarter, businesses primarily focused on the Inflation Reduction Act (IRA), tariffs, and trade. This followed conversations on the environment and carbon greenhouse gases, which included topics like renewables and electric vehicles. The fact that these issues received so much emphasis from businesses is evidence of this.
Sam Stovall, chief investment analyst at CFRA Research, claims that the heated discussions surrounding results calls have intensified since the election. The policy differences between the two candidates are far more pronounced than in the 2020 election, which is why this has occurred.
“The potential impact on company profits is significant, depending on which political party wins the White House, particularly if there is a strong surge of either liberal or conservative support,” Stovall stated in his press release.
Investors have noted that Harris’s sudden ascent to the position of vice president of the Democratic Party, following Joe Biden’s exit from the campaign in late July, has added an additional degree of uncertainty.
The contender for the Republican nomination, Donald Trump, has been quite loud about his intentions to enact substantial trade restrictions. He has promised to impose tariffs of sixty percent or more on all items that are imported from China. In addition to that, he has suggested the idea of a 10% tariff that applies to all products everywhere.
All Eyes Are on the Tax Policy
According to a note from Citi Research, tariffs and taxes significantly impact U.S. equity fundamentals. The research suggests that higher corporate taxes present a greater threat to earnings than tariffs.
“Taxes are the ultimate game-changer in this market,” expressed David Wagner, a portfolio manager at Aptus Capital Advisors.
The revised corporate tax rate will have an immediate impact on earnings growth. That is why numerous companies are increasingly discussing this matter to stay ahead of the game.
If Harris is successful in the upcoming November election, she plans to raise the corporate tax rate from 21% to 28%.
During his term, Trump reduced the rate from 35% to 21% and introduced additional tax benefits that are scheduled to end next year. He has promised to ensure that these reductions remain in place permanently.
The tightness of the presidential race – according to an Ipsos poll conducted from Aug. 2-7, Harris was ahead of Trump with 42% to 37% – creates challenges for companies to prepare for a specific result strategically.
Regarding the practice of companies or individuals preparing for possible tariffs, James Fitterling, the CEO of Dow Inc (NYSE:DOW), expressed his belief that no such actions have been taken thus far. He attributed this to the prevailing uncertainty surrounding the election and the uncertainty of which policies will ultimately be implemented.
However, a few companies have outlined their strategies for addressing the election results. The CEO of Elf Beauty, Tarang Amin, announced that the company will increase prices in response to the potential impact of higher tariffs in the event of a Trump victory.
“We strongly oppose the 60% tariff as we believe it unfairly burdens American consumers,” Amin expressed.
According to CEO Chris Peterson in an interview with Reuters, Newell Brands, the manufacturer of Sharpie pens, is relocating a portion of its kitchen appliance production from China due to the uncertainty surrounding tariffs.
The election’s result could have significant consequences for companies operating in the energy and electric vehicle industries.
When it comes to energy, Harris is widely anticipated to align with Biden’s policies and has shown support for his groundbreaking IRA. On the other hand, Trump is expected to reverse a significant portion of it.
Additionally, Trump has expressed his willingness to eliminate a $7,500 tax credit for individuals who purchase electric vehicles.
Their capacity to advance policies will also rely on obtaining the support of Congress.
“The determining factor will be the party in control of the House and the Senate, regardless of the president’s identity,” expressed Thomas Hayes, the chairman and managing member at Great Hill Capital, LLC.
