What Lies Ahead for the U.S. Economy and Stock Markets if Trump or Harris Wins the Next Election? - A Perspective from QQ Capital Fund

As we approach a decisive election, the U.S. could see significant shifts in its economy and stock market behavior depending on whether Donald Trump or Kamala Harris assumes leadership of the White House. Daniel Quintero, CIO at QQ Capital Fund, provides his perspective on how the landscape might unfold over the next four years, sharing insights into the opportunities and challenges that markets could face under each potential administration.

1. Stock Markets Under a Donald Trump Administration

If Donald Trump returns to office, we're likely to see a return to his distinctive pro-business, "hands-off" approach to markets. This would mean fewer regulations, low corporate taxes, and an economic policy focused on boosting the private sector.

A Short-Term Rally... with Mid-Term Risks From our perspective, the stock markets would likely respond immediately and positively to a Trump victory. During his first term, we saw how tax cuts and deregulation fueled a remarkable rise in the stock market. With Trump back in power, another initial market rally wouldn't be surprising, especially in sectors like finance, energy, and manufacturing, which typically benefit from a more relaxed regulatory environment. However, mid- and long-term risks should be taken into account. Tax cuts and increased spending can inject capital into companies but could also significantly increase the national deficit and public debt. What does this mean for investors? In our view, a correction could eventually occur, especially if markets perceive growth as unsustainable or if the Federal Reserve raises interest rates to contain the deficit.

Volatility on the Horizon Due to Foreign Policy Another major factor we believe would impact stock markets under Trump is his foreign policy stance, particularly regarding China. The trade war initiated during his first term created uncertainty and tensions that weighed on the markets at crucial times. If Trump continues this confrontational approach, markets could face prolonged volatility each time there's a new tariff measure or escalation of tensions. This would especially impact tech companies, given their exposure to the Chinese market. In summary, while a Trump victory might bring a strong initial rally, the risk of prolonged volatility is a factor that should be taken seriously.

2. Stock Market Outlook Under a Kamala Harris Administration

Kamala Harris represents a continuation of Biden's progressive policies and would likely seek to strengthen an agenda of economic redistribution, infrastructure investment, and sustainability. From our perspective, this approach offers both advantages and potential drawbacks for the stock markets.

Long-Term Stability with Targeted Sector Growth If Harris assumes the presidency, we expect a mixed reaction in the markets. In the short term, sectors like renewable energy, technology, and infrastructure would likely see a strong boost from public investment and tax incentives in these areas. This could mean solid opportunities for investors in green tech companies, as the government would likely support the energy transition. However, there is one factor we believe could limit overall market growth in the short term: increased taxes on corporations and high-income individuals. This could put pressure on the profits of some companies and potentially lead Wall Street to react cautiously.

A Less Volatile Market but with Moderate Growth In our view, a Harris victory could bring a less volatile market than a Trump administration, as her foreign policy approach would likely be more diplomatic and less confrontational. We believe this could improve predictability and stability in international trade, which investors generally welcome. However, Harris's progressive approach may lead to moderate market growth rather than the spectacular rallies we saw under Trump. Fiscal and public investment policies create long-term stability, but the market would likely not experience the same explosive jumps. This suggests that long-term investors might find interesting opportunities, though they would likely see steadier, less aggressive growth.

3. Four-Year Outlook: Which Path Is More Attractive for Investors?

For the next four years, the paths of Trump and Harris offer unique benefits and challenges.

• With Trump, the path is clear for those seeking quick returns in traditional sectors. However, at QQ Capital Fund, we believe it's a high-risk bet: instability in foreign policy and high fiscal deficits are factors that could create an environment prone to crises or sharp corrections. This option requires constant monitoring and a flexible strategy to enable quick exits if conditions turn turbulent.
• With Harris, the market may not provide the same short-term return peaks, but the predictability in her policies and focus on emerging sectors could be an attractive play for investors focused on the mid- to long-term. We believe this scenario could create a more sustainable growth foundation for key sectors in the future, such as green technology and infrastructure, which are pillars of the new economy.

In my personal opinion as CIO of QQ Capital Investment Fund, I lean toward the perspective of sustainable and diversified growth that a Harris administration would likely bring. The stability and predictability of her approach align with a prudent investment strategy focused on stability and sector diversification. Nonetheless, short-term investors might find intriguing opportunities in a Trump market, particularly in sectors benefiting from less restrictive fiscal policies.

The outlook is complex, and at QQ Capital Investment Fund, we will continue to closely monitor each candidate's movements and adjust our strategies to adapt to any changes. In times of uncertainty, flexibility and diversification are essential. We believe that, regardless of the election outcome, the next four years will be a crucial period for redefining stock market priorities in the U.S. and on the global stage.

Join the Conversation The upcoming election raises important questions for investors and the broader economy. We invite you to share your thoughts and perspectives on the possible market impacts. Let's open the floor to discussion and exchange insights on how best to navigate this pivotal period.