Biden Versus Trump: Impact on ETF Investing World
Zacks Investment Research | Oct 14, 2020 01:00AM ET
The prime election day is breathing down one’s neck and the investing world is busy assessing the impact of a Democrat or Republican win. Polls are seemingly not favorable for President Trump at the current level the CNN article noted. One should not forget that Trump won the election in 2016 despite trailing the then-Democratic candidate Clinton in many polls.
In such a scenario, an investing case should be worked out for the both the scenario – Biden or Trump win.
Biden Favors Tax Hike & Trump Doesn’t
Biden’s winning means the partial rollback of President Trump’s Tax Cuts and Jobs Act. Notably, President Trump’s tax law lowered the corporate tax rate from 35% to 21%, starting 2018. Analysis by the Tax Foundation reveals that Biden’s plan is to hike the corporate tax rate to 28%. Biden is also proposing to levy a minimum tax rate of 15% — a potentially damaging outcome for some major companies which pay little in taxes (read: All About Biden's Tax Plan & Its Impact on the ETF World ).
Though like many analysts, we believe that the tailwind from the tax cut is now “SPY should see easy gains if Trump wins.
Banks: Trump-Friendly
Banks have been key beneficiaries in the lower-tax environment. Big U.S. banks have enjoyed an average 13% increase to earnings per share from the lower rate, per Goldman Sachs (NYSE:GS) . Banks also enjoyed easing of regulatory stringencies in recent years.
Moreover, lower tax rates would mean risk-on sentiments in the market, which would boost long-term treasury yields. This would further boost net interest margins and increase banks’ profits. SPDR S&P Regional Banking (NYSE:KRE) ETF (FRAK .
Infrastructure: Both Biden & Trump Friendly
Joe Biden proposed a $1.3 trillion infrastructure overhaul last year. The Democratic presidential candidate’s campaign eyes investing in restoring highways, roads and bridges, while trying to boost adoption of electric vehicles and trains.
Meanwhile, the Trump administration is reportedly weighing a nearly $1 trillion infrastructure plan as part of its efforts to bolster the American economy. A preliminary version being prepared by the Department of Transportation would take care of most of the funding for projects such as roads and bridges, and would also keep money for 5G wireless infrastructure and rural broadband.
Hence, iShares U.S. Infrastructure ETF led small-cap stocks to fare better than the S&P 500, the Nasdaq and the Dow Jones.
Meanwhile, Democratic candidate Joe Biden is Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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