Tragically, the pandemic has magnified the wealth gap in our country. While over 200,000 people in the U.S. have lost their lives and millions more their jobs and businesses, the DJIA, S&P 500 and the NASDAQ markets hit new highs. Affluent Americans who have investments in financial assets saw increases in their net worth while many of those who depend on a paycheck are struggling.
The stark differences between Democrat and Republican plans for the future have greatly increased engagement in the election process. We assess two possible election outcomes and their consequences:
A blue wave with sufficient Senate democrats to enact Biden policies
- Large government stimulus and infrastructure programs
- Increase in minimum wage nationwide
- Increased emphasis on green energy
- Enhancement of Obamacare
- Improved international relations
- Increase in top income tax bracket from 37 to 39.6%
- Increase in capital gains taxes for those with incomes over $1mm
- Increase in corporate tax levels
- Smaller stimulus package and infrastructure plan
- States will be allowed to set minimum wages individually
- Slower adoption of clean energy
- Repeal of Obamacare
- Continued pushback against China
- No increase in individual tax brackets
- No increase in the capital gains rate and a possible reduction
- No increase in corporate tax levels
- As a country, the U.S. needs to address those who have suffered the most during the pandemic.
- The economic status of lower income citizens needs to improve, or we risk increased social unrest and the inability to grow our consumer spending-based economy.
- With healthcare costs skyrocketing in the last decade, affordable healthcare in the U.S. must happen.
- The crumbling infrastructure in the U.S. must be fixed.
- U.S. debt rising as a percentage of GDP and the concomitant printing of U.S. dollars destabilizes our currency and pressures the dollar’s value.
- The dollar will eventually be replaced as a reserve currency, possibly by a new multi-government cryptocurrency.
- The recovery in the U.S. will lead to increased inflation this time, partly due to changes in Federal Reserve policy allowing inflation to run hot (above 2%).
- Legalization of marijuana is a matter of when, not if, and may help fund some of our borrowings.
- China will challenge the U.S. as the world’s most important economy.
- Emerging markets have much to gain from positive population demographics and a weaker dollar.
Although election disruptions may cause a near term stock market sell off, it is not all bad. Historically, markets improve once elections are decided, regardless of which party wins. So, these tricky markets suggest a future treat.
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