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Markets & Research
All this and an election, too
Matt Miller
Political Economist

A presidential race will cap one of the topsy-turviest years in recent memory. The outcome could affect the outlook for certain industries.


What a turbulent year. COVID-19 has had an enormous impact, medically and economically. Markets have seesawed, falling off at the quickest pace on record before regaining a chunk of ground in what has thus far been a notable recovery, albeit a partial one. And, of course, protests about racial inequality have gripped the country.


On top of all this, it’s a presidential election year, with President Donald Trump and Vice President Joe Biden maneuvering to distinguish themselves amid the cacophony of social and political unease. Needless to say, it’s important to cut through the hype and hyperbole. With that in mind, here are some of the candidates’ top positions and likely goals, along with what their policies could mean for investors. Though there could be some overlap between the candidates, such as in infrastructure development, the priorities of each could have widely disparate effects on individual industries.


Regardless of who occupies the White House, there’s an essential point to keep in mind: Markets as a whole have moved higher during both Republican and Democratic administrations. As the accompanying chart shows, presidential elections have, historically speaking, made little difference when it comes to long-term investment returns.


President Trump


A fundamental question about Trump’s presidency is: Why does he want to be president? We know he’s competitive, but I’ve always thought he wanted to do a big infrastructure program. Buildings and construction are his bailiwick, and all politicians like their names emblazoned on freeways, airports and the like.


Thus, Trump could try to make infrastructure a centerpiece of his second term. I think in retrospect he wished he’d begun with that agenda in 2017, but got stuck in the morass of the repeal-and-replace health care fight. In fact, Trump himself has suggested as much, making a rare admission in a 2018 interview that there were some things he would have done differently in his first year. 


My strong hypothesis is that one of those things is infrastructure. He could craft a bipartisan bill that could clear the House and even the Senate if Democrats were to regain it. Of course, he isn’t likely to reverse his tax cuts to get this done; I’d expect him to turn to deficit spending or something like a gas tax. A big build-out like this could boost construction,engineering and materials firms.


Trade is an area in which Trump has real conviction, and I think he had a long-term plan in the phase one China trade deal last year. COVID-19 probably scrambled whatever he had in mind, though, and I imagine he would try to come back for another deal in his second term. A follow-on deal wouldn’t look much like the first — the U.S.-China relationship has deteriorated from last year. I expect Trump would focus on tech abuses and probably want to extend bans on companies he feels could hurt U.S. security, as he did with Huawei. This could provide a boost to domestic communications and technology companies.


Trump’s other big concern is immigration. As a second-term president, he’d have more freedom on the issue. I think he could make a kind of Nixon-to-China move; after all, nobody in the current political scene is viewed as tougher on immigration than Trump, and he could bring along hard-line GOP members. He’d have to bring in some Democrats to get a deal done, so it could be one part DACA (the “Dreamer” program, officially known as Deferred Action for Childhood Arrivals) and one part border security, with the aim of bringing in more skilled immigrants and fewer family members. This might be a boon to high-tech and other industries that already struggle to find enough engineers, coders and other specialty workers to fill their ranks.


Vice President Biden


In any scenario where Biden wins, I assume he’d want to do a big economic package. It would probably have a chunk of infrastructure, and it would probably be expensive. To pay for it, he’s said he would raise taxes on big businesses and the wealthy. That could weigh on markets, in the inverse of how Trump’s tax cuts boosted stock prices in 2017. But a building program could have winners, most notably engineering and construction firms.


Obviously, Biden is also committed to building out the Patient Protection and Affordable Care Act — that is, Obamacare. A Biden administration would face pressure to move toward “Medicare for All,” but I don’t think that would happen. He likely thinks it’s better politics and better policy to focus on refining the existing system. Depending on how this plays out, a health care expansion could give a lift to insurers and the managed health care sector.


Biden also has an ambitious climate plan, even though it was dwarfed by his Democratic opponents’ proposals during the primary. He said he’d spend almost $2 trillion over 10 years — a substantial investment and much larger than any presidential administration’s efforts to date. De-emphasizing fossil fuels would obviously hurt so-called dirty energy industries, but green sectors, including renewables, could get a boost. And if Biden wins, that boost could come soon; I think he’d do something on this issue early on.


The Democrats might also be forced to consider a procedural question that could echo for years. As it stands now, they could take the Senate, but not by enough seats to beat the filibuster. That bit of legislative legerdemain essentially requires bills to have a 60% majority, which can give significant power to a stubborn minority party.


The thing is, it’s just a rule — it’s not constitutionally or legally mandated. If the Senate turns blue, expect the progressive wing to attack the filibuster so it can enact sweeping changes without any GOP support. What’s interesting here is that Biden’s a bit of a traditionalist and a moderate. He might want to keep the filibuster out of respect for custom, but he might also want an anchor to keep the party’s agenda from drifting too far left. If the Democrats sweep the upper house and the presidency, expect some conflict on this issue.



Matt Miller is a political economist at Capital Group and host of the Capital Ideas podcast. He was formerly a senior advisor at McKinsey, a Washington Post columnist and author, host of public radio's "Left, Right & Center" program, and a Clinton White House aide. He holds a law degree from Columbia and a bachelor's degree in economics from Brown.


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