Why Markets Reacted Subtly to Trump-Harris Debate
U.S. stock futures saw little movement following the presidential debate between Republican nominee Donald Trump and Vice President Kamala Harris. While debates typically impact market sentiment, this particular exchange failed to deliver a clear catalyst for traders. A combination of factors, including the upcoming release of August inflation data and the Federal Reserve’s policy decision next week, left investors waiting for more concrete economic signals.
Focus on Economic Platforms
Both candidates highlighted their economic strategies, but neither seemed to sway market sentiment significantly. Kamala Harris outlined her plan to boost small businesses through tax credits and expand support for middle-class Americans. Trump reiterated his focus on protecting the U.S. economy through aggressive tariffs and tax cuts. While the candidates clashed over these approaches, the lack of specificity in their policy updates may have contributed to the muted market reaction.
Impact on U.S. Debt and Taxes
A major point of divergence between the two candidates lies in how their tax policies would affect U.S. debt. Trump’s proposals, which include extending his 2017 tax cuts, exempting Social Security income, and reducing corporate tax rates further, could add between $3.6 trillion to $6.6 trillion to the national deficit over the next decade, according to multiple estimates. Meanwhile, Harris’ proposals, including a first-time homebuyer credit and a revised Child Tax Credit, may add between $400 billion and $1.4 trillion to the deficit.
However, Harris’ plan also features revenue-raising measures, such as higher taxes on top earners and corporations, which could offset some of the deficit increases. Trump, on the other hand, offers no traditional tax increases but instead points to tariffs and economic growth as potential offsets, which many economists view as insufficient.
Tariffs and Trade
Trump’s emphasis on tariffs to protect U.S. industries could significantly impact inflation and consumer prices. Economists suggest that his proposed 10% global tariff and a 60% tariff on Chinese imports could generate up to $3.8 trillion over a decade, but at the cost of higher prices for consumers. Tariffs often act as a hidden tax on households, driving inflation and reducing disposable income, which could negatively affect consumer spending—a crucial driver of U.S. economic growth.
Harris, on the other hand, has taken a less aggressive stance on trade, advocating for adjustments rather than sweeping tariffs. This approach may limit the inflationary effects but could leave the U.S. vulnerable to foreign competition in certain sectors.
Market Forecast: Cautiously Bearish
Given the candidates’ plans, a Trump victory could result in higher inflation due to tariffs, and a ballooning deficit from extended tax cuts, leading to a bearish outlook for the economy in the long term. Harris’ policies, while more fiscally balanced, could also face inflationary pressure if her spending plans outpace her revenue-raising initiatives. Overall, the lack of detailed economic proposals from either candidate during the debate left investors cautious but unmoved, awaiting more definitive data.
