The November election gave the Republicans control of two of the three branches of government. Former President Donald Trump’s victory over Vice President Kamala Harris gave the Republicans control of the Executive Branch and by winning a majority in both the House of Representatives and the Senate, they now have control over the Legislative Branch as well. What will this “Red Sweep” mean for the economy?

With former President Donald Trump regaining control of the White House and having majority support in both the House and the Senate, it is more than likely that President Elect Trump’s economic campaign promises will come to fruition. Trump has proposed increasing Federal revenue by imposing tariffs on goods made in foreign countries. He plans on imposing a 60% tariff on all goods made in China and a 10-20% tariff on all goods made in other countries. While some feel that this will hurt US competitiveness, others believe it will encourage the US to manufacture its own goods on our own soil. Leading to another Trump incentive, his proposal to lower the Corporate Tax rate from 21% to 15% for any companies producing goods in the US. 

Trump has also pledged to renew most of the provisions of the 2017 Tax Cut Job Act (TCJA), which is set to expire in 2025. He plans on making these provisions permanent, including a higher level for personal standard deductions and lower taxes in most brackets. 

Trump has proposed several new targeted tax breaks, including an exemption on taxes on both overtime and tipped income. The former president has also proposed excluding Social Security payments from income taxes. He has also proposed expanding the Child Tax Credit from $2000 to $5000.00. 

President-elect Trump has argued for broad deregulation, which has been supported by the Supreme Court’s decision to repeal the Chevron Doctrine. By overturning Chevron the powers of regulatory agencies have become extremely limited if not potentially non-existent.  Big Tech may see mixed impacts from de-regulatory policies, and energy companies stand to benefit most from looser regulations. Additionally, the perception of less anti-trust enforcement could boost corporate Mergers and Acquisitions (M&A) moving forward.

In response to the election, Equity markets have rallied strongly, the Treasury yields and the U.S. dollar have surged. Greater policy change under a “sweep” could affect economic growth, inflation and market performance. Time will tell in the months to come how much an effect this sweep will have. 

Tickers to consider:  IKT, KALA, EVAX, JTAI

Sylva Disclaimer: https://www.sylvacap.com/disclaimer