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Election Odds and Investment Focus as November 5 Approaches

With just days to go until the presidential election on November 5, polls suggest it will be a close race between former President Donald Trump and Vice President Kamala Harris. Both candidates are campaigning hard in swing states, and investors may be worried about how either outcome might affect their portfolios.

2024 Election Odds Show Trump Leading Harris 62.7% to 36%

The 2024 election landscape is evolving in real time, and one way to track that is through betting odds rather than traditional polling. This approach, which aggregates odds from multiple betting markets, is increasingly seen as a more dynamic measure of each candidate's chances. While traditional polls capture voter sentiment at a particular moment in time, betting odds incorporate the financial stakes that people are willing to place on outcomes, offering a unique, market-driven perspective that tends to smooth out short-term shifts and noise.

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Currently, RealClearPolitics (RCP) shows Trump with a 62.7% chance of winning, while Harris holds at 36%. This betting average reflects multiple platforms, including BetOnline, Betsson, and PointsBet, and signals a steady increase in confidence for Trump over recent months. It’s worth noting that these markets respond rapidly to any new information, giving them an edge in predicting outcomes compared to traditional polls, which can lag behind public sentiment shifts.

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It’s Important to Maintain Perspective on Taxes this Election Season

Tax policy is another area where the election could have significant impacts, particularly with the Tax Cuts and Jobs Act (TCJA) set to expire in 2025, creating what some call a "tax cliff." Trump and Harris have markedly different views on corporate taxes, individual rates, capital gains, and tax credits, leaving questions about what might change post-election.

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It’s important to maintain perspective around tax policy since these issues can be politically heated. While taxes have a direct impact on households and companies, they do not always have a straightforward effect on the overall economy and stock market. This is because taxes are only one of the factors that influence growth and returns, and there are many deductions, credits, and strategies that can reduce the statutory tax rate.

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Keeping a level head on tax matters is essential. While taxes affect both households and corporations directly, they’re just one piece of the economic puzzle. There are numerous deductions, credits, and planning strategies that can help manage the impact. Even if the top marginal tax rate rises from 37% to 39.6%, U.S. rates remain low by historical standards. As federal debt rises, it’s sensible for investors to expect rates to increase, but with strategic planning, the impact can be mitigated.

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Planning for Estate Tax Adjustments Post-Election

One area with particularly low tax rates right now is on estates, impacting wealth transfers. The TCJA raised the exemption level to $13.6 million for 2024. If it reverts to about $6.8 million per person in 2026, wealthier families will see a significant shift in planning strategies, depending heavily on Congressional outcomes.

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Although estate taxes constitute only a small portion of government revenue, and the percentage of people who are subject to estate tax is small, this has become a challenging political issue. The future of estate taxes will very much depend on the results of this election, including the results of Congressional races. For many wealthier households, this could have a significant impact on tax and estate planni

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Global Trade and Tariffs Will Depend on the Election

The candidates also differ on their potential trade policies, especially when it comes to tariffs. While the wave of deglobalization and the reshoring of manufacturing is likely to continue, how tariffs are used to increase U.S. competitiveness and generate revenue could depend on the outcome of the election. That said, President Trump’s administration enacted a number of tariffs during his time in office, most of which were continued by the Biden administration.

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Tariffs were once a major factor in trade and a significant source of revenue for the U.S. government, but in recent decades they’ve played a small role. Over the past century, the formation of organizations and agreements - such as the WTO, NAFTA, the USMCA, and others - helped to ease trade barriers across major partners. Still, the use of tariffs to protect domestic industries and intellectual property, including steel, electronics, semiconductors, agricultural goods, and more, have occurred periodically.

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For investors nervous about a possible trade war, it’s important to note that the same fears in 2018 and 2019 did not lead to the worst-case scenarios that some predicted. The economy remained strong during this period, with unemployment near historic lows and inflation non-existent, even though it was quite late in the business cycle. Eventually, ongoing negotiations between key trading partners helped to mitigate some fears. As the accompanying chart shows, throughout different trade regimes, the U.S. has maintained a trade deficit with many countries.

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The Economy Has Grown Under Both Parties

When it comes down to it, history shows that the economy has grown under both political parties and bull markets have occurred regardless of who occupied the White House. Although it may seem counterintuitive, this is because politics often has a small impact on the economy and markets. Specifically, the business cycle and broad trends such as the growth of artificial intelligence and technology advancements, falling inflation, and the strong job market matter far more.

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Despite the perceived importance of this election, policy changes also tend to be gradual due to checks and balances in our political system. What candidates promise on the campaign trail can differ from what they can actually enact.

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When it comes to taxes, neither candidate is proposing a return to pre-Reagan era tax levels when the top marginal rates reached as high as 94%. When it comes to trade, tariffs may increase but they are unlikely to reach the levels experienced almost a century ago during the Great Depression. It’s important to keep these facts in perspective when planning for the next four years.

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The Bottom Line?

Regardless of election outcomes, our growth-focused strategies are designed to thrive through cycles of change, positioning portfolios to excel amid shifts. History shows that innovation-driven investments outperform over the long term, even when political landscapes are in flux. By staying committed to a long-term vision, we’re positioned to capture opportunity no matter who wins this election season.

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