Written by: Li Xiaoyin, Wall Street News
Due to the poor non-farm data released last Friday, U.S. stocks fell. The S&P fell more than 1.7% and more than 4% for the week, the largest weekly drop in a year and a half.
In addition to concerns about a recession, the uncertainty surrounding the U.S. election as it enters its final stages has also weighed on U.S. stocks.
At 9:00 a.m. Beijing time on Wednesday, presidential candidates Trump and Harris will hold their second debate of the 2024 election in Philadelphia. This will also be the first head-on confrontation between Harris and Republican presidential candidate Trump on the same stage after she succeeded Biden as the Democratic presidential candidate.
How does the debate proceed?
Minsheng Securities concluded that according to the debate rules, Trump and Harris will have a 90-minute live televised debate at 9 p.m. local time on September 10. There will be no audience on site, and when one party speaks, the other party's microphone will be muted.
Harris had previously requested that the microphone be turned on throughout the debate (to expose Trump's character flaws), and she agreed to the mute rule on September 5. The two sides may debate again in October, but there are no specific arrangements yet.
The debate topics are expected to be similar to the debate between Trump and Biden on June 27, focusing on domestic economic policies, including inflation, corporate and personal taxes, housing, immigration, etc. How Harris, who lacks policy experience, responds will be a major highlight.
What does the market care about most?
According to media reports, Harris and Trump may clash on inflation, tariffs, taxes and other issues during Wednesday's debate.
Trump's economic policy is centered on imposing tariffs. He called for a 10% to 20% tariff on all foreign goods and a basic tariff on all foreign-made goods. Harris, on the other hand, advocates restrictive tariffs, continuing the moderate trade policy and the "small courtyard high wall" in the field of technology.
Some economists have pointed out that the impact of raising tariffs on economic growth is "more harmful than beneficial" and will push up inflation. An analysis by the Peterson Institute for International Economics shows that the price increase caused by Trump's tariff system will increase the annual expenses of an average American family by $2,600.
Secondly, taxation is also a major issue. Both parties use tax cuts as a campaign strategy, but they differ on whether to increase or reduce corporate taxes.
Harris advocates "Rewarding Work, Not Wealth", raising the corporate tax rate from 21% to 28% (Trump's 2017 legislation reduced it from 35% to 21%) and raising the minimum tax rate; Trump's tax reduction policy is more direct and single (fully extending corporate and personal tax breaks), and plans to cut taxes on businesses.
In addition, the tax cuts introduced by Trump in 2017 are set to expire next year, so the next president will face the decision of whether to extend the policy.
GF Securities also added that in terms of housing policy, Harris' policy plan is more radical, advocating a massive increase in supply while subsidizing demand, while Trump's publicity on housing subsidies is very limited.
In terms of energy policy, Harris hopes to increase the proportion of clean energy by increasing investment in new energy and subsidy projects; while Trump claims that if he wins the White House again, he will consider canceling the federal tax credit of up to $7,500 for electric vehicles.
Overall, Harris is more radical in domestic economic policies, while Trump is more radical in overseas economic policies.
Trump deal vs Harris deal
GF Securities pointed out that the differences in the policy proposals of Harris and Trump (such as corporate tax policy and energy policy) have different impacts on related industries under different circumstances, which is the relatively clearest part of the financial market's distinction between the "Trump deal" and the "Harris deal."
In terms of the subsequent impact, both of their policy proposals will bring risks of inflation and rising deficits, and there is still uncertainty about the impact on economic growth. Trump's trade policy may be bearish for non-US assets.
Impact on inflation: Harris's anti-inflation policy is relatively comprehensive, but there are practical operational problems. The stimulus to the housing market in particular contains implicit inflationary incentives. Trump's policy focus is more concentrated, but his policies on trade and immigration will also bring uncertainty to inflation.
Impact on government deficit: Both Harris and Trump policies point to higher deficit ratios, but the former is relatively more controllable.
Impact on economic growth: There is uncertainty about the impact of the two's policy proposals on the nominal growth rate, so the market is relatively more sensitive to the actual Fed policy in terms of total volume pricing. From a structural perspective, Harris's policy is relatively favorable to new energy, real estate, and mass consumption.
Impact on non-US assets: Trade policy may be a key difference, and Trump’s coming to power may bring short-term concerns about the trade environment.
