Not trying to start a political debate here—just curious about what the stock market might be expecting.
With the election coming up, do you think the market has already factored in a win for either candidate?
In the last election, one candidate contested the results, creating uncertainty. Do you think the possibility of that happening again is already reflected in stock prices?
“While elections might shake up the markets short-term, it’s key for investors to look long-term,” says Alex Michalka, VP of investment research at Wealthfront. “Looking back at US stock data from 1927 to 2023, election years typically haven’t had a major impact on performance, and neither does one party winning over the other.”
@Lyle
Exactly.
Anyone who thinks they know for sure what’s going to happen doesn’t really know.
@Lyle
Did they analyze economic data from years later, though?
Milan said:
@Lyle
Did they analyze economic data from years later, though?
Stock returns and economic performance don’t always go hand-in-hand.
It’s more about future cash flow and expectations around that, plus what investors are willing to pay.
@Harlan
Kind of true, but major issues like supply chain problems and price hikes due to tariffs impacted the market for over a year.
Milan said:
@Harlan
Kind of true, but major issues like supply chain problems and price hikes due to tariffs impacted the market for over a year.
While tariffs can raise prices, they’re not inflationary in the usual sense—they’re a form of tax that doesn’t pump more money into the economy like government spending does.
Right now, around 50% of our taxes come from income, and we’re making about $22 trillion in income, so we’re paying $11 trillion in tax. We import around $4 trillion in goods, so even a 100% tax on imports would only be $4 trillion, assuming all imports stayed the same—which they wouldn’t.
Increasing taxes generally doesn’t lead to inflation since it’s about taking money out, not putting it in. Real inflation would come from something like paying cash to importers as their goods land.
Tariffs wouldn’t even increase the deficit while being a tax. The talk around them is mostly exaggerated.
@Ben
Isn’t inflation just “prices going up”? It’s not as simple as that, but generally speaking, if tariffs make imported goods more expensive, isn’t that inflationary? It might be more like a ‘leak’ than an open faucet, but the effect is still there.
In the end, who’s really paying for the tariffs—the company or the customer?
Prices go up
Not exactly. Tariffs shouldn’t affect local goods, so there’s a difference.
While tariffs might make some imports pricier, they’re also removing money from the economy, which can actually increase purchasing power in a strange way. It’s a balance.
The faucet is leaking
True, and bigger drains could get rid of the water faster.
Who’s paying the tariff?
Usually, it’s the consumer. But taxes work best on goods with a negative impact, like pollution. So with imports, either the consumer or importer might foot the bill if they can’t sell their goods profitably. There’s a trade-off here, especially if we want to cut CO2 emissions.
tariffs wouldn’t affect local goods
Would they really? Even with a 20% tariff, some companies might still find it cheaper to make goods abroad.
Plus, the U.S. imports so much that even if we’re making things like bread here, we import the flour.
Also, wasn’t the tariff on Mexico more about immigration? Feels like tariffs aren’t about economics but more about ‘I don’t like you’ policies, which could affect everyone.
bigger drains would help
In this case, those ‘drains’ are taxes. Tariffs are basically taxes on importers.
even with a 20% tariff
Imports can still be cheaper depending on the product, so some companies might stick to foreign production.
A lot of your points seem speculative, though. It’s clear you’ve got some other opinions, so let’s agree to disagree.
@Ben
Fair enough. But you mentioned that tariffs might actually increase purchasing power—could you explain that in simple terms? I know what purchasing power is, but I don’t see how a tax would increase it.
@Drew
A tax reduces money in circulation, so technically it can increase the value of the dollar overall. Less money means each dollar buys slightly more, balancing out higher prices in some goods. Not a perfect solution but that’s the gist.
Looking at the data alone, the market might be expecting a slight chance of Trump winning. Historically, when polling’s close, the GOP tends to win the electoral vote.
What actually matters is who controls the House and Senate. It’s looking like a split government, so right-leaning and left-leaning policies probably won’t go anywhere.
There might be a lot of volatility in the short term, but if it’s a divided government, I’d expect business as usual.
@Avery
Normally, I’d agree. But it doesn’t look like the market has priced in the idea of new tariffs, which can be implemented by the president alone. I think they’re expecting Kamala to win and for there to be a gridlock.
@Ellis
I don’t think tariffs are priced in yet. CEOs might believe they can convince Trump not to go through with them.
Perry said:
@Ellis
I don’t think tariffs are priced in yet. CEOs might believe they can convince Trump not to go through with them.
Check out the 10-year Treasury yield: 10-Year Treasury Constant Maturity Minus Federal Funds Rate (T10YFF) | FRED | St. Louis Fed
It’s spiked in the past month, which might be from tariff concerns.
@Daryl
The bond market has a limited impact here.
Bonds are more about monetary policy than fiscal. If we didn’t sell bonds, interest rates would drop to zero.
tariffs increasing the deficit
Not really—tariffs are a tax, so they don’t add to the deficit.
@Ben
If we’re running a surplus, the Treasury wouldn’t need to issue bonds.
During the Clinton years, we had a surplus and stopped issuing bonds. It caused liquidity issues in some markets. So no, bonds are issued because of fiscal needs.
Perry said:
@Ellis
I don’t think tariffs are priced in yet. CEOs might believe they can convince Trump not to go through with them.
I doubt Trump would go through with tariffs; it’s probably just a negotiating tactic.