Historical precedent often can give us insight into present-day affairs; however, for the upcoming presidential election experts say that this might not be the case.
“The playbook from previous elections no longer works,” said Dan Clifton, partner and head of policy research for Strategas. “Nobody really knows at this point which way the presidential election is going to go. Our motto is to be prepared for all outcomes.”
Clifton was interviewed by BOK Financial® Chief Investment Strategist Steve Wyett for an Oct. 1 webinar on how the presidential and congressional elections could impact financial markets, tax policy, the economy and fiscal policy. BOK Financial hosted the event.
Between the Democratic candidate changing from President Biden to Vice President Kamala Harris 100 days before the election, and Republican candidate Donald Trump’s criminal charges and having been shot at twice, there’s no historical precedent for all that we’re experiencing, Clifton noted.
Here’s what we know—and don’t know—as this landmark election approaches, according to Clifton:
1. The U.S. presidential election is one of many pivotal elections in 2024. More than 70 countries and territories—amounting to 44% of the world’s population—are electing new leaders this year. One notable event was Mexico’s election of its first-ever female president, Claudia Sheinbaum. The fact that Mexico has a new president could prove key when the United States-Mexico-Canada Agreement (USMCA) is negotiated in 2026, especially since Canada may also have a new leader in 2025.
2. The outcome of the election could cut back the movement of manufacturing into Mexico and impact the speed of deglobalization. Meanwhile, in the U.S., if Former President Trump is elected, he, more than Vice President Harris, may try to curtail the trend of Chinese companies moving their manufacturing into Mexico. Chinese manufacturers have been doing this to move production closer to the U.S. and to avoid U.S. tariffs and sanctions on Chinese goods, as the final product is considered to be Mexican, rather than Chinese, when it has been manufactured in Mexico.
U.S. companies have also been moving manufacturing to North America, away from China, to reduce the possibility of large-scale supply-chain disruptions from happening again. One beneficiary, along with Mexico, has been the U.S. itself. As Wyett noted, “Spending on manufacturing capacity has skyrocketed in the last 12 months from increased spending on new facilities. That should lead to higher manufacturing output, though it hasn’t yet.” This is all part of the ongoing trend of deglobalization, and as Clifton said, “This election is a referendum on the speed at which deglobalization is going to happen.”
3. The outcome of the U.S. presidential election could have major implications for global trade and cooperation—and global equities. Global markets are already recognizing the U.S. election’s potential impact on deglobalization. “Small changes in Trump or Harris's probabilities are affecting entire global stock markets and global currency markets,” Clifton said. For example, if more tariffs and sanctions are placed on Chinese goods, that could better position India to take over more of China’s supply chains.
“How these elections play out is going to determine where global growth is going to happen. Moving forward, it's going to determine where earnings are generated and where companies are going to seek new markets,” he said.
4. Equity markets are unshaken—so far. Even with the unprecedented events we’ve seen leading up to this election, equity markets like the S&P 500 and the Dow Jones Industrial Average are still up year-to-date. “The good news is that the equity market has not been affected by everything that we’ve gone through,” Clifton said.
Presidential reelection years are normally good for markets because the incumbent tends to stimulate the economy to increase their chances of being elected. President Biden has done this even though he stepped down from the race, which is one factor helping markets.
However, at the same time, the switch in candidacy from Biden to Harris has shifted it from a reelection to an open election. The latter tends to create more market volatility because of the uncertainty around each candidate’s policy proposals, Clifton said. As BOK Financial Chief Investment Officer Brian Henderson noted in his fourth-quarter outlook, this increased uncertainty could temporarily bring down financial markets leading up to the election, but then markets may rise again to new highs afterwards.
5. Some old sector-party alliances aren’t holding true this time. Looking more closely at equities, the sectors that are expected to benefit depending on which party wins the presidency are falling along unusual lines, according to Clifton.
For example, the industrial sector would likely benefit more if Harris wins because her trade policy probably would be less restrictive and she might spend more than Trump would on infrastructure and defense. The fact that defense stocks would benefit from a Harris win is unusual, as this sector normally benefits the most from a Republican win. However, Trump’s views on ending the war in Ukraine has made the opposite the case, Clifton explained.
Meanwhile, another unusual aspect of this election is that tech stocks probably would benefit from Trump winning more than Harris winning. “In most election playbooks, tech is associated with Democrats and not the other way around,” Clifton said. However, he added that Trump’s stances on China would probably benefit Taiwan and thus the semiconductor industry.
6. This will be a close one—a very close one. Finally, if there’s one thing to be sure of amid the unusual nature and uncertainty of this election, it is that it’s a tight race, experts agreed.
In Clifton’s words, “The key point is that the margins are so thin here that external events could impact the election one way or another.” And between national disasters like Hurricane Helene, the recent port workers’ strike and ongoing turmoil in the Middle East, the months leading up the election have been eventful, to say the least.
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