How the U.S. election could affect markets

By Michelle Schriver | October 9, 2020 | Last updated on December 19, 2023
4 min read

As the two U.S. presidential candidates run on very different platforms, investors are preparing for the potential fallout for financial markets depending on the victor.

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Whoever wins, “the election will have implications across a broad range of sectors,” said Avery Shenfeld, managing director and chief economist at CIBC Economics, in an Oct. 2 interview.

When considering how the election will impact markets and the economy, Shenfeld noted two key periods: the time leading up to the inauguration in January and the longer term.

During the first period, uncertainty about the election process could arise, including the potential for election results to be disputed, Shenfeld said. Ballot rules and vote counts could be called into question, especially as voters use mail-in ballots during the pandemic.

At the first presidential debate last month, President Donald Trump refused to say he would wait for independently certified election results before declaring victory on Nov. 3, and he made several false statements about elevated risks of fraud through mail-in voting.

Another risk is social unrest among U.S. citizens disappointed with election results.

These issues are “something that we haven’t seen in past elections,” Shenfeld said. “It’s certainly a potential source of financial market volatility until we know who’s the president of the United States.”

At the debate, Trump also wouldn’t agree to urge supporters to stay calm while votes are counted. Former vice-president and Democratic presidential nominee Joe Biden said he would not declare victory before the election result has been independently certified.

As of late last week, Biden held a 9.7% lead over Trump, according to RealClearPolitics’ average of national polls.

In the longer term, policy will have an impact on markets. A Biden win would affect particular sectors of the equity market, Shenfeld said, adding that the Democratic Party would also have to win the Senate to easily implement policy (it currently controls only the House of Representatives).

For example, Biden’s proposal to increase the corporate tax rate to 28% from 21% would be negative for equities markets, “though that may now be largely priced in,” Shenfeld said.

On the other hand, government coffers would benefit from that tax increase, as well as from Biden’s proposal to increase taxes on the wealthy, including reversing measures in the Tax Cuts and Jobs Act, implemented by the Trump administration.

Subsequently, if government spending were to increase or lower-income Americans were to receive more in transfers, demand and opportunity would be created in some sectors, Shenfeld said.

Among Biden’s other proposed policies, climate change measures would be significant.

“A Biden administration promises to bring in much tougher measures to arrest climate change,” Shenfeld said. These include repealing certain tax incentives for fossil fuels, and introducing reforms and incentives related to clean energy.

“Longer term, that may well be a positive for the fate of the U.S. economy and indeed the global economy,” Shenfeld said.

In the near term, however, “there’s clearly some winners and losers.”

The traditional U.S. energy sector would be among the latter, and Canadian energy companies would see mixed results.

Climate change policies would “put U.S. energy companies on a level playing field with Canadian companies that are already dealing with those sorts of similar regulatory changes,” Shenfeld said.

At the same time, “Biden’s an opponent to the Keystone pipeline and will be taking a tougher line to make sure that countries like Canada live up to their share of the bargain in terms of climate change,” he said.

The alternative energy sector would be a beneficiary of climate change policies. “There’s generally some opportunities … in that sector that will increase under a Biden administration,” Shenfeld said, such as electric or hydrogen fuel cell cars.

In recent election commentary, the BlackRock Investment Institute said that, given the structural shift to sustainability, it sees opportunities in private markets in transport and renewables, as well as digital infrastructure, regardless of election results.

Some tech companies could also benefit from the clean energy transition and a shift toward greater energy efficiency, BlackRock said.

If Trump were to be re-elected, the result would be business as usual, Shenfeld said, which would likely include a volatile trade environment.

“We do have a trade agreement between Canada and the U.S.,” he said, “but remember, that hasn’t stopped the White House from imposing tariffs on our aluminum sector. We could see things like that arise again.”

Trump would also likely make his 2017 tax cuts permanent, retaining the lower corporate taxes that pose a competitive challenge for Canada.

This would mean a “tougher climate” for Canada to attract new corporate investment, Shenfeld said.

This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.

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Michelle Schriver

Michelle is’s managing editor. She has worked with the team since 2015 and been recognized by the National Magazine Awards and SABEW for her reporting. Email her at