U.S. Executives Discuss Upcoming Presidential Election

By Medha Singh

(Reuters) – U.S. company executives are increasingly discussing the upcoming presidential election compared to four years ago, as candidates Kamala Harris and Donald Trump present starkly different policy proposals on taxes, tariffs, and pricing power.

During earnings calls from June 15 to August 15, mentions of “election” or “White House” by S&P 500 companies surged by 34% over the same period in 2020, according to LSEG Workspace data.

Key policy topics fueling discussions include energy, carbon emissions, the Inflation Reduction Act (IRA), tariffs, and trade, as highlighted by a FactSet analysis.

Sam Stovall, chief investment strategist at CFRA Research, noted that the sharper policy distinctions between the two candidates may be driving the heightened focus on the election in earnings calls.

“Company profits could be affected materially, depending on which party gains the White House, especially with a blue or red wave,” Stovall remarked.

Harris’ unexpected rise to the top of the Democratic ticket following President Joe Biden’s exit adds another layer of uncertainty for investors.

Investment insights from Robert Pavlik, senior portfolio manager at Dakota Wealth Management, suggest that while Trump’s plans are more defined, Harris’ approach remains less clear but is anticipated to resemble Biden’s policies with some variations.

Trump has clearly stated his intention to implement stringent trade restrictions, asserting he would impose tariffs of 60% or more on all Chinese goods, and proposing a 10% universal tariff.

Citi Research emphasizes that tariffs and taxes significantly influence U.S. equity fundamentals, indicating that rising corporate taxes could pose a greater risk to earnings than tariffs.

“It all comes down to taxes… that’s the rally killer for this market,” commented David Wagner, portfolio manager at Aptus Capital Advisors.

Harris proposes increasing the corporate tax rate from 21% to 28% if she wins the November election, while Trump aims to make his previous cuts permanent.

With a narrow race, as indicated by an Ipsos poll with Harris at 42% and Trump at 37%, companies face challenges in strategizing for a specific electoral outcome.

Dow Inc’s CEO James Fitterling mentioned uncertainty hinders any preparatory measures regarding potential tariffs.

Some companies are proactive regarding potential election outcomes: Elf Beauty’s CEO Tarang Amin indicated plans to raise prices in anticipation of higher tariffs if Trump wins, deeming a 60% tariff a tax on American consumers.

Newell Brands is preemptively relocating some kitchen appliance production away from China due to tariff uncertainties, as explained by CEO Chris Peterson.

The election result may significantly impact firms in the energy and electric vehicle sectors, with Harris likely to continue Biden’s energy policies, which Trump would seek to undo.

Trump has echoed intentions to reconsider the $7,500 tax credit for electric vehicles. The ability to implement policies will also depend on congressional support.

“The key will be who controls the House and the Senate, irrespective of who is the president,” remarked Thomas Hayes from Great Hill Capital, LLC.