About Last Night and What to Expect Going Forward: Markets, Macro, Equities, Taxes, Tariffs and the Fed
America decided its 47thPresident last night as Republican candidate and former President Donald Trump won the election beating Democratic candidate and current Vice President Kamala Harris. Trump won the electoral vote and leads the popular vote with nearly 72M votes vs ~67M for Harris. If the lead holds, he could be the first Republican to win both the electoral and popular vote counts since 2004.
Additionally, the Republican Party is set to take control of the Senate while battle for control of the House remains unclear, with some close races potentially taking several days to resolve, particularly in some districts in NY and CA.
Today equities have been up big post-election, as the potential for a Red Sweep would increase the likelihood of tax cuts. Analysts and strategists have also continued to anticipate very favorable seasonality through the rest of the year, particularly in election years. Corporate buybacks are anticipated to make a comeback as November has historically been the largest buyback execution month of the year with almost 10.5% of annual spend.
As it relates to the forecasted trading landscape, small caps and the R2K are likely to be a significant beneficiary as the R2K typically trends toward outperformance of the S&P 500 through the remainder of the year following presidential elections. The potential for stricter immigration policy implies an increase in wages in addition to executive branch pressure on the Fed to continue easing. Banks have been identified as one of the most to benefit from deregulation as well. Onshore energy, steel production and law enforcement are some plays that are speculated to be potential winners with Crypto/Bitcoin also seeing positive sentiment. Retail, machinery and semicap equipment also have been mentioned as areas for potential gains. On the flip side, Treasuries and industries or companies with exposure to China are expected to see negative pressure as Trump has called for 60% tariffs.
As it relates to taxes and tariffs Trump has proposed cutting the corporate tax rate from 21% to 15%, which would rank as the sixth-biggest tax cut since 1940. According to Goldman Sachs, this would arithmetically boost S&P 500 earnings by ~4%. The Street is anticipating S&P 500 earnings growth of 15.1% in 2025 on 5.7% revenue growth. Barclays estimates US tariffs to increase to 60% and 10% on good imports from China. In the short-term, inflation is expected to rise by approximately 0.9bps in the US with GDP growth subject to a delayed drag.
The anticipated 25bp rate cut by the Fed which will be announced tomorrow remains unchanged however, estimates of no rate cut in December have increased with the market pricing only two 25bp cuts for next year with potential risk of a pause in rate cuts should large tariffs be announced. Bloomberg cited that Trump’s win adds some uncertainty to longer-term Fed outlook given Trump has already said he won’t reappoint Powell when his term ends in May 2026.
