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In the past, the principle applied: Democratic presidents of the United States are bad enough for the economy. Because left-wing projects like tax increases, redistribution, and more regulation reduce corporate profits, then the simple reason.
And following this logic, Donald Trump was long the darling of Wall Street: His corporate tax reforms and massive deregulation ensured that the profits of American corporations grew considerably in recent years. At the same time, American stock markets were booming. Therefore, for a long time Trump was the preferred candidate of the markets.
But now business leaders and investors have taken note of Democratic challenger Joe Biden’s election victory with astonishing calm. When his election victory became apparent last week, Wall Street stock prices rose. Stock exchanges are unlikely to start trading at a huge loss after this weekend.
But none of this means that business representatives suddenly approve of left positions. His serenity about the election result can most likely be explained by the fact that Democrats failed to win across the board: Republicans are likely to retain their majority in the Senate. Many corporate executives are now likely to be relieved because, contrary to fears, the new president is unlikely to get away with multiple projects. “That’s why Wall Street has a very positive mood,” former Trump communications chief Anthony Scaramucci told SPIEGEL.
The US newspaper Wall Street Journal even called Biden’s election victory a “dream scenario for the economy”: a moderate and reliable president in power who will not be able to get away with his plans in the Senate. Investors and business leaders get the best of both worlds.
Biden had announced, for example, that he would raise taxes for corporations and the wealthy, one of his main concerns in the election campaign. His plan: Corporate tax, which Republicans had cut from 35 to 21 percent, will rise to 28 percent. Investment income and income over $ 400,000 per year will also be subject to higher taxes.
But the future president can probably forget about these plans if Republicans keep their majority in the Senate. Especially Republican Majority Leader Mitch McConnel could undo Biden’s plans. According to Scaramucci, therefore, it is “good for the wallet”. Biden’s plans for comprehensive healthcare reform or calls to cut drug prices are also unlikely to be fulfilled.
Tech corporations as the big winners?
Tech giants like Apple, Amazon, Facebook and Google will also benefit from the government’s limited ability to act: They will continue to make huge profits without having to fear higher taxes.
The tech industry could emerge as the big winner for other reasons as well. On the one hand, Biden is likely to adopt a softer tone in the trade dispute with China, the new tariffs are likely off the table under his aegis: this relieves companies like Apple, which buy a number of components from Asia. On the other hand, it could make it easier for tech companies to hire highly skilled workers from abroad. Wanting to reform H-1B class entry visas, Trump had made it difficult for highly-skilled scientists, engineers and programmers to enter by decree during his tenure.
Larger regulatory bills in the Senate are also likely to be more difficult to enforce. Although both parties are now critical of the enormous market power of technology companies, Republicans and Democrats differ considerably in their analysis. This can be seen, for example, in the dispute over the handling of user content. Biden said in an interview with the New York Times that he wanted to repeal section 230 of the Communications Decency Act, which protects companies like Facebook and Twitter from being responsible for the opinions of their users. Businesses would need to curb the spread of falsehoods by increasing post moderation on platforms. Trump, on the other hand, accuses the platforms of restricting the spread of conservative views.
So it will take some time before there is a consensus in the US on how to regulate tech companies. The triumphant advance of technology companies is likely to continue.
According to Tilmann Galler, capital market strategist at JP Morgan Asset Management, who will be the next president of the United States is therefore not the most important factor that will determine the economy and capital markets in the weeks and months to come. “The Covid-19 pandemic, which has picked up again, is likely to influence developments in the markets much more intensely than the US presidency in the coming months,” he says. And at this point, the outlook for companies recently has been significantly less rosy.
