According to research from Ned Davis Research (NDR), the upcoming November presidential election is poised to benefit the stock market regardless of whether Democrat nominee Kamala Harris or Republican nominee Donald Trump wins. Both candidates’ economic proposals are expected to stimulate the economy and create a favorable environment for investors in 2025.
NDR’s senior U.S. economist Veneta Dimitrova highlighted that both Harris and Trump plan to increase the federal budget deficit by $220 billion to $650 billion annually. This level of deficit spending is anticipated to drive economic growth. Additionally, anticipated interest rate cuts from the Federal Reserve could further boost the stock market, creating what NDR describes as a “risk-on” environment.
Kamala Harris’s key proposals include extending the 2017 Tax Cuts and Jobs Act (TCJA) benefits for households earning less than $400,000, increasing the Child Tax Credit to $3,600 per child and $6,000 per newborn, and eliminating income taxes on tips. Donald Trump’s platform includes extending the TCJA tax cuts for all income levels, increasing the Child Tax Credit to $5,000 per child, and eliminating income taxes on Social Security benefits for seniors.
Both candidates are expected to introduce additional stimulus measures, complementing the significant government spending already set in motion by Biden administration policies like the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS Act. These initiatives are projected to inject $357 billion into the economy through 2031.
Dimitrova also noted that regardless of who wins, these combined stimuli should create a positive tailwind for economic growth and the stock market in 2025. Additionally, a potential weakening of the U.S. dollar due to increased deficit spending could further boost corporate profits and U.S. stock prices.
However, there are potential risks, including a possible surge in inflation if Trump’s tariff proposals or Harris’s price-gouging measures are implemented. Dimitrova cautioned that these proposals are not yet law, and their implementation depends on the outcome of congressional elections.
“Ultimately, the makeup of Congress will determine the feasibility of these proposals and may act as a check on spending and tax changes,” Dimitrova said.
