Investors are concerned about some Democratic presidential candidates’ proposed policies. However, others have moderate views regarding structural reform. We’ll discuss different Democratic presidential candidates’ proposed policies and the impact on the stock market.
The US under President Trump
President Trump’s fiscal stimulus has boosted the US economic growth rate. In 2018, the US GDP grew 2.9% annually—the fastest pace since 2005. The stock market is also at a record high.
The S&P 500 Index (SPY) has risen 29.2% on a year-to-date basis. Last week, the S&P 500 Index rose 0.6%—the fourth consecutive weekly rise. On December 27, the S&P 500 made an intra-day high of 3,248—an all-time high.
Last month, the unemployment rate was at the lowest level since 1969. The United States–Mexico–Canada Agreement and phase one of the trade deal would strengthen the US job market.
Based on Gallup, President Trump’s “term average to date” presidential job approval rating is at 40% compared to an average of 53% for all of the US presidents between 1938 and 2019. In December, President Trump’s approval rate is at 45%. At the same time during President Obama’s term, the approval rating was at 43%.
Despite a stronger employment market in the US, other factors like environmental issues, the rising wealth gap, gun violence, and immigrants could impact the presidential election next year. Moody Analytics said that a higher voter turnout could favor Democrats. Read Do Analysts See an Easy Win for Trump in 2020 Election? to learn more.
A RealClear Politics poll suggests that Joe Biden is the front-runner among the Democratic presidential candidates. Biden said, “This country wasn’t built by Wall Street bankers and CEOs and hedge fund managers. It was built by the American middle class.” If elected, Joe Biden would focus on improving “middle-class competitiveness.”
He has vowed to strengthen the Affordable Care Act. According to Biden, the act is a significant achievement for Democrats. President Trump has criticized the act. Notably, the Trump administration has tried to repeal this act. Healthcare sector stocks are sensitive to any changes in Obamacare.
Biden doesn’t approve of President Trump’s stance on immigrants. He said, “It is a moral failing and a national shame when a father and his baby daughter drown seeking our shores.” Biden also said that building a wall on the Mexico border doesn’t solve security issues. He thinks that building a wall wastes taxpayers’ money.
Democrats on the environment
On environmental issues, Biden proposed an investment of $1.7 trillion for ten years to transform the US into “net-zero greenhouse gas emissions no later than 2050.” However, Democratic presidential candidate Elizabeth Warren proposed an investment of $10.7 trillion to increase the reliance on cleaner sources of energy to 100%. Warren thinks that her plan would create millions of jobs.
Democratic presidential candidates Bernie Sanders and Warren both proposed a ban on fracking. The proposed ban might be a concern for energy sector investors. A RealClear Politics poll suggests that Sanders and Warren are the most popular Democratic presidential candidates after Biden.
Stance on wealth tax
According to Biden, “Trump’s tax cuts” are benefiting “super-wealthy and corporations.” He vowed to end this subsidy. Warren also has similar views. She proposed imposing a wealth tax on 6% on the billionaires. Sanders also thinks that a wealth tax would help the government raise revenues. In an interview with CNBC, Democratic presidential candidate Pete Buttigieg said, “We should consider a wealth tax. I think it makes sense.”
Not all of the Democratic presidential candidates support implementing the wealth tax. In October, Andrew Yang spoke to CNBC. He said, “But I agree that it would be somewhere between problematic and a disaster in practice,” about the implementation of the wealth tax. Mike Bloomberg supports the idea of “taxing wealthy people.” However, like Yang, he thinks that a wealth tax “just doesn’t work.”
President Obama introduced legislative changes to impose a higher tax on wealthy Americans. However, investors are worried about how the wealth tax will impact the equity market.
Read Mark Mobius Warns of a Crash if Trump Loses in 2020 to learn more.