Updated October 23, 2024
Trump Tax Plan and Implications for Your Your Portfolio: How Investors Should Prepare
Trump Tax Plan and Implications for Your Your Portfolio: How Investors Should Prepare
Trump Tax Plan and Implications for Your Your Portfolio: How Investors Should Prepare
Joseph Gradante, Allio CEO
The Macroscope
What’s Ahead:
Evaluating Tax Policy Proposals: We’ll flesh out how tax plans from major candidates could affect your investment and work income, particularly capital gains and marginal tax rates for high earners.
Making Sense of Historical Returns by Political Party: Research shows that markets perform about the same depending on who is in the White House.
Staying Balanced Amid Economic Uncertainty: Avoid making major shifts to your portfolio based solely on election outcomes but always stay informed to adapt your strategies as needed.
Votes are already being cast. With Election Day just weeks away, you might feel some uncertainty – even anxiety – regarding what might unfold starting next year when a new administration and Congress take office. The big thing is not to make wholesale shifts to your portfolio or everyday life. Our team focuses a lot on the political landscape but also recognizes that stock market returns have been strong, on average, no matter who has been in office.
Let’s dive into Vice President Harris’ and former President Trump’s ideas around taxes and other impactful policies poised to affect your finances. We’ll then reveal historical stock market performance trends – the numbers might surprise you. Finally, Allio believes that staying on top of what’s happening politically is critical, particularly considering how poor lawmakers are on fiscal policy, but taking big election bets with your investments might not be worth it.
Harris vs Trump Tax Plan
The months leading up to Election Day have been filled with heated debates on tax policy. Put bluntly, both candidates seem to have little regard for restoring fiscal order in Washington. It’s one hand-out promise after another, and questions grow about how to pay for so many breaks to the lower and middle classes.
Kamala Harris
The Vice President seeks to raise taxes on businesses and high-income households. Her plan includes a 28% corporate tax rate, above today’s 21% level. Recall that former President Trump’s signature 2017 Tax Cuts and Jobs Act (TCJA), among its many achievements, lowered the business tax to bring it more in line with the global average.
On investments, Harris looks to increase the top tax rate on long-term capital gains (those earned no assets held more than one year) to 28% for taxpayers with a taxable income above $1 million. Additionally, she aims to raise the net investment income (NIIT) tax rate to 5% on income above $400,000. If you are a high earner and just starting to accumulate a significant portfolio, these policies (if enacted) would result in a notable hit. And you may have heard about Harris’ idea to tax unrealized capital gains; while that’s not likely to pass, it would likely only apply to the ultra-rich.
For families, Harris is really going after the middle-class vote. Part of her platform includes expanding the child tax credit to $6,000 for children under a year old, $3,600 for kids age 2-5, and $3,000 for older children. Those figures are in line with the temporarily expanded benefits from the pandemic era. For service workers, she wants to nix tax on tip income, something Trump had previously floated. Another handout would be new housing tax credits, including a potential $25,000 credit for down payments for first-time homebuyers.
To pay for all these de facto stimulus measures, Harris has been outspoken about not only increasing taxes on businesses but also raising top marginal income tax rates, at least to what they were before the TCJA.
Donald Trump
The 45th POTUS is sticking to his guns on both the TCJA and embracing his “Tariff Man” moniker. Along with making the individual and estate tax cuts from the 2017 act permanent, Trump would impose a universal baseline tariff on all US imports as well as a 60% tariff on Chinese imports. He would fight to reduce the corporate tax rate to 20% with a special 15% rate on net income earned by companies making products in the US.
On capital gains, he has not outlined specific plans, but the presumption is that he would not change current policies – a 15% rate on long-term capital gains and short-term capital gains being taxed at marginal income rates.
For families, there have been whispers of a possible $5,000 child tax credit – this is something his running mate, Senator J.D. Vance, champions. Just recently, Trump came out in favor of reinstating an unlimited itemized deduction for state and local taxes (commonly known as the SALT exemption) or ending its cap. This was a controversial piece of the TCJA. Ditching the SALT deduction limit would be a boon to not only folks residing in areas with high state income taxes like New York, Illinois, and California but also Texas – a state slowly turning politically purple.
Another hot topic as the campaign trail has heated up is the former president’s idea to exempt Social Security income from tax liability; another measure that would be tough to get through Congress (which controls the purse). Finally, Trump wishes to make tip income and overtime pay tax-free.
Making Sense of it All
It’s the same old playbook from the left: Raise taxes on high-income households and businesses to help fund tax breaks for the lower and middle class. Harris’ ideas, including an apparent attempt to crack down on profits in the low-margin grocery industry, are liberal, and could benefit low-income families while hurting high-income households. Trump’s proposals are friendlier to the wealthy, though questions remain as to how inflationary more tariffs would be. Both candidate’s fiscal measures would likely continue to balloon the national debt.
Harris vs Trump Tax Policy Summary
Politics and the Stock Market
Tax policy, economic growth initiatives, fiscal stimulus efforts – you’d think all of this would have major impacts on how the S&P 500 performs. Spoiler alert: there’s no real relationship between which party holds the presidency and how equities perform. Individual industries and sectors are for sure impacted by specific government measures, but the market as a whole sort of does its own thing.
In data going back to the early 1950s (shortly after the S&P 500 was created), the median SPX return is about 10% if a Republican is in the White House and 9% when a Democrat controls the executive branch. Sharp losses during the terms of Gerald Ford and George W. Bush resulted in the average GOP return being about three percentage points less than the market’s average annual return when a Democrat is president.
S&P 500 Returns by Presidential Party and Term
Source: FactSet Data
So, voting for Harris might be a better idea based on the performance data, right? Not necessarily. There are so many other factors at play, and the US economy is such a behemoth that even major policies don’t often have lasting bullish or bearish impacts on stocks.
Here’s another way to think about it – returns are solidly positive when either party is in charge. Buying only when your preferred candidate wins and selling when the opposing party enters office results in severe long-term underperformance compared with just staying in the game.
We are data nerds, and we know that investors want to know more. The makeup of the Senate and House matters on issues related to spending and taxes. Some assert that companies big and small would do better under Republican leadership since that often means lower taxes. Others might claim that Democrats pushing for more aggressive household credits would lead to more family spending, better corporate profits, and rising stock prices. The truth? It’s a mixed bag.
According to data since 1945, the S&P 500 has done better with a Democratic President and either a split or Republican-controlled Congress. A GOP-led Congress with a Republican President has also produced above-average annualized equity returns. What has not worked since the middle of the last century is the situation of a Republican president and a Democratic or split Congress. As a general rule, a divided DC is thought to be bullish for the S&P 500.
Overall, the right approach is to simply remain invested. Let’s unpack that further.
S&P 500 Annualized Returns by Government Composition (1945-2020)
Source: CFRA Research Data
Politics and the Stock Market Summary
High Uncertainty, But Tread Lightly with Portfolio Changes
We have outlined a boatload of policies and numbers. It's a lot to take in, but the ultimate message should be reassuring: Just keep doing what you’re doing!
While it’s intriguing to consider all the new tax incentives and the range of possible tax rates in store over the following four years, it is hard to know with precision what the future holds. As of mid-October, it’s a neck-and-neck race, and we detail it weekly in our Macro Market Monitor.
Young investors with above-average incomes have a leg up. You have time on your side to weather any potential volatility that could come about after the fifth of November. Continuing to periodically invest in a globally diversified global macro portfolio with Allio gives you the power to take advantage of market dips that could lie ahead.
The key thing is to avoid investment decisions based on emotion or political partisanship. The 24/7 news cycle makes that challenging, but acting impulsively usually leads to regret. For example, in the lead-up to the 2016 presidential election, many investors feared that a Trump victory would lead to a market downturn. But the opposite happened, and the markets rallied after his win.
The same went for the 2020 election when many expected that President Biden’s proposed corporate tax hikes would hurt the market. While there was some short-term volatility, the stock market continued to perform well throughout much of 2021, driven by other factors like what the Fed was doing and the economic recovery from the pandemic. Of course, a bear market came in 2022, but returns have been huge in the past two years with the SPX up more than 60% since the market low on October 12, 2022.
So, rather than making a risky portfolio adjustment, we encourage folks to stay disciplined. Ensure that your allocation aligns with your ability, willingness, and need to take risk across stocks, bonds, and other asset classes. We make that easy at Allio with our low-cost, institutional-grade portfolios. Being balanced between growth and value equities, domestic and foreign stocks, and even large and small caps could make sense. As always, ensure you have an ample emergency fund and short-term reserves to help you meet near-term financial goals.
Your Decisions Matter More than Election-Night Decisions
The Bottom Line
Election years bring out some real craziness, but your portfolio should remain grounded. Amid a whirlwind of speculation, debate, and extreme market predictions by both sides, investors should avoid being swayed by all that noise.
Remember that while elections absolutely matter (and we are outspoken on many issues), the stock market has a long history of growth regardless of which party controls the White House and Congress. Focus on your goals, and continue to allocate to personalized plans that Allio brings to all investors.
Disclosures
Allio Capital is not a hedge fund, does not offer hedge funds, and does not serve as investment manager to any hedge funds. Information is provided for educational purposes only and does not constitute a recommendation.
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
What’s Ahead:
Evaluating Tax Policy Proposals: We’ll flesh out how tax plans from major candidates could affect your investment and work income, particularly capital gains and marginal tax rates for high earners.
Making Sense of Historical Returns by Political Party: Research shows that markets perform about the same depending on who is in the White House.
Staying Balanced Amid Economic Uncertainty: Avoid making major shifts to your portfolio based solely on election outcomes but always stay informed to adapt your strategies as needed.
Votes are already being cast. With Election Day just weeks away, you might feel some uncertainty – even anxiety – regarding what might unfold starting next year when a new administration and Congress take office. The big thing is not to make wholesale shifts to your portfolio or everyday life. Our team focuses a lot on the political landscape but also recognizes that stock market returns have been strong, on average, no matter who has been in office.
Let’s dive into Vice President Harris’ and former President Trump’s ideas around taxes and other impactful policies poised to affect your finances. We’ll then reveal historical stock market performance trends – the numbers might surprise you. Finally, Allio believes that staying on top of what’s happening politically is critical, particularly considering how poor lawmakers are on fiscal policy, but taking big election bets with your investments might not be worth it.
Harris vs Trump Tax Plan
The months leading up to Election Day have been filled with heated debates on tax policy. Put bluntly, both candidates seem to have little regard for restoring fiscal order in Washington. It’s one hand-out promise after another, and questions grow about how to pay for so many breaks to the lower and middle classes.
Kamala Harris
The Vice President seeks to raise taxes on businesses and high-income households. Her plan includes a 28% corporate tax rate, above today’s 21% level. Recall that former President Trump’s signature 2017 Tax Cuts and Jobs Act (TCJA), among its many achievements, lowered the business tax to bring it more in line with the global average.
On investments, Harris looks to increase the top tax rate on long-term capital gains (those earned no assets held more than one year) to 28% for taxpayers with a taxable income above $1 million. Additionally, she aims to raise the net investment income (NIIT) tax rate to 5% on income above $400,000. If you are a high earner and just starting to accumulate a significant portfolio, these policies (if enacted) would result in a notable hit. And you may have heard about Harris’ idea to tax unrealized capital gains; while that’s not likely to pass, it would likely only apply to the ultra-rich.
For families, Harris is really going after the middle-class vote. Part of her platform includes expanding the child tax credit to $6,000 for children under a year old, $3,600 for kids age 2-5, and $3,000 for older children. Those figures are in line with the temporarily expanded benefits from the pandemic era. For service workers, she wants to nix tax on tip income, something Trump had previously floated. Another handout would be new housing tax credits, including a potential $25,000 credit for down payments for first-time homebuyers.
To pay for all these de facto stimulus measures, Harris has been outspoken about not only increasing taxes on businesses but also raising top marginal income tax rates, at least to what they were before the TCJA.
Donald Trump
The 45th POTUS is sticking to his guns on both the TCJA and embracing his “Tariff Man” moniker. Along with making the individual and estate tax cuts from the 2017 act permanent, Trump would impose a universal baseline tariff on all US imports as well as a 60% tariff on Chinese imports. He would fight to reduce the corporate tax rate to 20% with a special 15% rate on net income earned by companies making products in the US.
On capital gains, he has not outlined specific plans, but the presumption is that he would not change current policies – a 15% rate on long-term capital gains and short-term capital gains being taxed at marginal income rates.
For families, there have been whispers of a possible $5,000 child tax credit – this is something his running mate, Senator J.D. Vance, champions. Just recently, Trump came out in favor of reinstating an unlimited itemized deduction for state and local taxes (commonly known as the SALT exemption) or ending its cap. This was a controversial piece of the TCJA. Ditching the SALT deduction limit would be a boon to not only folks residing in areas with high state income taxes like New York, Illinois, and California but also Texas – a state slowly turning politically purple.
Another hot topic as the campaign trail has heated up is the former president’s idea to exempt Social Security income from tax liability; another measure that would be tough to get through Congress (which controls the purse). Finally, Trump wishes to make tip income and overtime pay tax-free.
Making Sense of it All
It’s the same old playbook from the left: Raise taxes on high-income households and businesses to help fund tax breaks for the lower and middle class. Harris’ ideas, including an apparent attempt to crack down on profits in the low-margin grocery industry, are liberal, and could benefit low-income families while hurting high-income households. Trump’s proposals are friendlier to the wealthy, though questions remain as to how inflationary more tariffs would be. Both candidate’s fiscal measures would likely continue to balloon the national debt.
Harris vs Trump Tax Policy Summary
Politics and the Stock Market
Tax policy, economic growth initiatives, fiscal stimulus efforts – you’d think all of this would have major impacts on how the S&P 500 performs. Spoiler alert: there’s no real relationship between which party holds the presidency and how equities perform. Individual industries and sectors are for sure impacted by specific government measures, but the market as a whole sort of does its own thing.
In data going back to the early 1950s (shortly after the S&P 500 was created), the median SPX return is about 10% if a Republican is in the White House and 9% when a Democrat controls the executive branch. Sharp losses during the terms of Gerald Ford and George W. Bush resulted in the average GOP return being about three percentage points less than the market’s average annual return when a Democrat is president.
S&P 500 Returns by Presidential Party and Term
Source: FactSet Data
So, voting for Harris might be a better idea based on the performance data, right? Not necessarily. There are so many other factors at play, and the US economy is such a behemoth that even major policies don’t often have lasting bullish or bearish impacts on stocks.
Here’s another way to think about it – returns are solidly positive when either party is in charge. Buying only when your preferred candidate wins and selling when the opposing party enters office results in severe long-term underperformance compared with just staying in the game.
We are data nerds, and we know that investors want to know more. The makeup of the Senate and House matters on issues related to spending and taxes. Some assert that companies big and small would do better under Republican leadership since that often means lower taxes. Others might claim that Democrats pushing for more aggressive household credits would lead to more family spending, better corporate profits, and rising stock prices. The truth? It’s a mixed bag.
According to data since 1945, the S&P 500 has done better with a Democratic President and either a split or Republican-controlled Congress. A GOP-led Congress with a Republican President has also produced above-average annualized equity returns. What has not worked since the middle of the last century is the situation of a Republican president and a Democratic or split Congress. As a general rule, a divided DC is thought to be bullish for the S&P 500.
Overall, the right approach is to simply remain invested. Let’s unpack that further.
S&P 500 Annualized Returns by Government Composition (1945-2020)
Source: CFRA Research Data
Politics and the Stock Market Summary
High Uncertainty, But Tread Lightly with Portfolio Changes
We have outlined a boatload of policies and numbers. It's a lot to take in, but the ultimate message should be reassuring: Just keep doing what you’re doing!
While it’s intriguing to consider all the new tax incentives and the range of possible tax rates in store over the following four years, it is hard to know with precision what the future holds. As of mid-October, it’s a neck-and-neck race, and we detail it weekly in our Macro Market Monitor.
Young investors with above-average incomes have a leg up. You have time on your side to weather any potential volatility that could come about after the fifth of November. Continuing to periodically invest in a globally diversified global macro portfolio with Allio gives you the power to take advantage of market dips that could lie ahead.
The key thing is to avoid investment decisions based on emotion or political partisanship. The 24/7 news cycle makes that challenging, but acting impulsively usually leads to regret. For example, in the lead-up to the 2016 presidential election, many investors feared that a Trump victory would lead to a market downturn. But the opposite happened, and the markets rallied after his win.
The same went for the 2020 election when many expected that President Biden’s proposed corporate tax hikes would hurt the market. While there was some short-term volatility, the stock market continued to perform well throughout much of 2021, driven by other factors like what the Fed was doing and the economic recovery from the pandemic. Of course, a bear market came in 2022, but returns have been huge in the past two years with the SPX up more than 60% since the market low on October 12, 2022.
So, rather than making a risky portfolio adjustment, we encourage folks to stay disciplined. Ensure that your allocation aligns with your ability, willingness, and need to take risk across stocks, bonds, and other asset classes. We make that easy at Allio with our low-cost, institutional-grade portfolios. Being balanced between growth and value equities, domestic and foreign stocks, and even large and small caps could make sense. As always, ensure you have an ample emergency fund and short-term reserves to help you meet near-term financial goals.
Your Decisions Matter More than Election-Night Decisions
The Bottom Line
Election years bring out some real craziness, but your portfolio should remain grounded. Amid a whirlwind of speculation, debate, and extreme market predictions by both sides, investors should avoid being swayed by all that noise.
Remember that while elections absolutely matter (and we are outspoken on many issues), the stock market has a long history of growth regardless of which party controls the White House and Congress. Focus on your goals, and continue to allocate to personalized plans that Allio brings to all investors.
Disclosures
Allio Capital is not a hedge fund, does not offer hedge funds, and does not serve as investment manager to any hedge funds. Information is provided for educational purposes only and does not constitute a recommendation.
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
What’s Ahead:
Evaluating Tax Policy Proposals: We’ll flesh out how tax plans from major candidates could affect your investment and work income, particularly capital gains and marginal tax rates for high earners.
Making Sense of Historical Returns by Political Party: Research shows that markets perform about the same depending on who is in the White House.
Staying Balanced Amid Economic Uncertainty: Avoid making major shifts to your portfolio based solely on election outcomes but always stay informed to adapt your strategies as needed.
Votes are already being cast. With Election Day just weeks away, you might feel some uncertainty – even anxiety – regarding what might unfold starting next year when a new administration and Congress take office. The big thing is not to make wholesale shifts to your portfolio or everyday life. Our team focuses a lot on the political landscape but also recognizes that stock market returns have been strong, on average, no matter who has been in office.
Let’s dive into Vice President Harris’ and former President Trump’s ideas around taxes and other impactful policies poised to affect your finances. We’ll then reveal historical stock market performance trends – the numbers might surprise you. Finally, Allio believes that staying on top of what’s happening politically is critical, particularly considering how poor lawmakers are on fiscal policy, but taking big election bets with your investments might not be worth it.
Harris vs Trump Tax Plan
The months leading up to Election Day have been filled with heated debates on tax policy. Put bluntly, both candidates seem to have little regard for restoring fiscal order in Washington. It’s one hand-out promise after another, and questions grow about how to pay for so many breaks to the lower and middle classes.
Kamala Harris
The Vice President seeks to raise taxes on businesses and high-income households. Her plan includes a 28% corporate tax rate, above today’s 21% level. Recall that former President Trump’s signature 2017 Tax Cuts and Jobs Act (TCJA), among its many achievements, lowered the business tax to bring it more in line with the global average.
On investments, Harris looks to increase the top tax rate on long-term capital gains (those earned no assets held more than one year) to 28% for taxpayers with a taxable income above $1 million. Additionally, she aims to raise the net investment income (NIIT) tax rate to 5% on income above $400,000. If you are a high earner and just starting to accumulate a significant portfolio, these policies (if enacted) would result in a notable hit. And you may have heard about Harris’ idea to tax unrealized capital gains; while that’s not likely to pass, it would likely only apply to the ultra-rich.
For families, Harris is really going after the middle-class vote. Part of her platform includes expanding the child tax credit to $6,000 for children under a year old, $3,600 for kids age 2-5, and $3,000 for older children. Those figures are in line with the temporarily expanded benefits from the pandemic era. For service workers, she wants to nix tax on tip income, something Trump had previously floated. Another handout would be new housing tax credits, including a potential $25,000 credit for down payments for first-time homebuyers.
To pay for all these de facto stimulus measures, Harris has been outspoken about not only increasing taxes on businesses but also raising top marginal income tax rates, at least to what they were before the TCJA.
Donald Trump
The 45th POTUS is sticking to his guns on both the TCJA and embracing his “Tariff Man” moniker. Along with making the individual and estate tax cuts from the 2017 act permanent, Trump would impose a universal baseline tariff on all US imports as well as a 60% tariff on Chinese imports. He would fight to reduce the corporate tax rate to 20% with a special 15% rate on net income earned by companies making products in the US.
On capital gains, he has not outlined specific plans, but the presumption is that he would not change current policies – a 15% rate on long-term capital gains and short-term capital gains being taxed at marginal income rates.
For families, there have been whispers of a possible $5,000 child tax credit – this is something his running mate, Senator J.D. Vance, champions. Just recently, Trump came out in favor of reinstating an unlimited itemized deduction for state and local taxes (commonly known as the SALT exemption) or ending its cap. This was a controversial piece of the TCJA. Ditching the SALT deduction limit would be a boon to not only folks residing in areas with high state income taxes like New York, Illinois, and California but also Texas – a state slowly turning politically purple.
Another hot topic as the campaign trail has heated up is the former president’s idea to exempt Social Security income from tax liability; another measure that would be tough to get through Congress (which controls the purse). Finally, Trump wishes to make tip income and overtime pay tax-free.
Making Sense of it All
It’s the same old playbook from the left: Raise taxes on high-income households and businesses to help fund tax breaks for the lower and middle class. Harris’ ideas, including an apparent attempt to crack down on profits in the low-margin grocery industry, are liberal, and could benefit low-income families while hurting high-income households. Trump’s proposals are friendlier to the wealthy, though questions remain as to how inflationary more tariffs would be. Both candidate’s fiscal measures would likely continue to balloon the national debt.
Harris vs Trump Tax Policy Summary
Politics and the Stock Market
Tax policy, economic growth initiatives, fiscal stimulus efforts – you’d think all of this would have major impacts on how the S&P 500 performs. Spoiler alert: there’s no real relationship between which party holds the presidency and how equities perform. Individual industries and sectors are for sure impacted by specific government measures, but the market as a whole sort of does its own thing.
In data going back to the early 1950s (shortly after the S&P 500 was created), the median SPX return is about 10% if a Republican is in the White House and 9% when a Democrat controls the executive branch. Sharp losses during the terms of Gerald Ford and George W. Bush resulted in the average GOP return being about three percentage points less than the market’s average annual return when a Democrat is president.
S&P 500 Returns by Presidential Party and Term
Source: FactSet Data
So, voting for Harris might be a better idea based on the performance data, right? Not necessarily. There are so many other factors at play, and the US economy is such a behemoth that even major policies don’t often have lasting bullish or bearish impacts on stocks.
Here’s another way to think about it – returns are solidly positive when either party is in charge. Buying only when your preferred candidate wins and selling when the opposing party enters office results in severe long-term underperformance compared with just staying in the game.
We are data nerds, and we know that investors want to know more. The makeup of the Senate and House matters on issues related to spending and taxes. Some assert that companies big and small would do better under Republican leadership since that often means lower taxes. Others might claim that Democrats pushing for more aggressive household credits would lead to more family spending, better corporate profits, and rising stock prices. The truth? It’s a mixed bag.
According to data since 1945, the S&P 500 has done better with a Democratic President and either a split or Republican-controlled Congress. A GOP-led Congress with a Republican President has also produced above-average annualized equity returns. What has not worked since the middle of the last century is the situation of a Republican president and a Democratic or split Congress. As a general rule, a divided DC is thought to be bullish for the S&P 500.
Overall, the right approach is to simply remain invested. Let’s unpack that further.
S&P 500 Annualized Returns by Government Composition (1945-2020)
Source: CFRA Research Data
Politics and the Stock Market Summary
High Uncertainty, But Tread Lightly with Portfolio Changes
We have outlined a boatload of policies and numbers. It's a lot to take in, but the ultimate message should be reassuring: Just keep doing what you’re doing!
While it’s intriguing to consider all the new tax incentives and the range of possible tax rates in store over the following four years, it is hard to know with precision what the future holds. As of mid-October, it’s a neck-and-neck race, and we detail it weekly in our Macro Market Monitor.
Young investors with above-average incomes have a leg up. You have time on your side to weather any potential volatility that could come about after the fifth of November. Continuing to periodically invest in a globally diversified global macro portfolio with Allio gives you the power to take advantage of market dips that could lie ahead.
The key thing is to avoid investment decisions based on emotion or political partisanship. The 24/7 news cycle makes that challenging, but acting impulsively usually leads to regret. For example, in the lead-up to the 2016 presidential election, many investors feared that a Trump victory would lead to a market downturn. But the opposite happened, and the markets rallied after his win.
The same went for the 2020 election when many expected that President Biden’s proposed corporate tax hikes would hurt the market. While there was some short-term volatility, the stock market continued to perform well throughout much of 2021, driven by other factors like what the Fed was doing and the economic recovery from the pandemic. Of course, a bear market came in 2022, but returns have been huge in the past two years with the SPX up more than 60% since the market low on October 12, 2022.
So, rather than making a risky portfolio adjustment, we encourage folks to stay disciplined. Ensure that your allocation aligns with your ability, willingness, and need to take risk across stocks, bonds, and other asset classes. We make that easy at Allio with our low-cost, institutional-grade portfolios. Being balanced between growth and value equities, domestic and foreign stocks, and even large and small caps could make sense. As always, ensure you have an ample emergency fund and short-term reserves to help you meet near-term financial goals.
Your Decisions Matter More than Election-Night Decisions
The Bottom Line
Election years bring out some real craziness, but your portfolio should remain grounded. Amid a whirlwind of speculation, debate, and extreme market predictions by both sides, investors should avoid being swayed by all that noise.
Remember that while elections absolutely matter (and we are outspoken on many issues), the stock market has a long history of growth regardless of which party controls the White House and Congress. Focus on your goals, and continue to allocate to personalized plans that Allio brings to all investors.
Disclosures
Allio Capital is not a hedge fund, does not offer hedge funds, and does not serve as investment manager to any hedge funds. Information is provided for educational purposes only and does not constitute a recommendation.
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
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Trump's budget battle with Senate Republicans heats up as DOGE slashes federal spending. What it means for markets, inflation, and your portfolio.
AJ Giannone, CFA
Unleashing Animal Spirits: The Promise of a New Regime and America's Economic Renaissance
Allio explores the dawn of a new economic regime under Trump 2.0, urging investors to embrace free-market principles and look beyond short-term noise.
AJ Giannone, CFA
Diversification Across US and European Stock Markets in a Less Globalized World: What It Means for Investors Today
US vs. Europe stocks in 2025: Europe's early surge, but US remains "cradle of capitalism." Short-term gains vs. long-term growth. Dive into Allio's insights.
Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
This advertisement is provided by Allio Capital for informational purposes only and should not be considered investment advice, a recommendation, or a solicitation to buy or sell any securities. Investment decisions should be based on your specific financial situation and objectives, considering the risks and uncertainties associated with investing.
The views and forecasts expressed are those of Allio Capital and are subject to change without notice. Past performance is not indicative of future results, and investing involves risk, including the possible loss of principal. Market volatility, economic conditions, and changes in government policy may impact the accuracy of these forecasts and the performance of any investment.
Allio Capital utilizes proprietary technologies and methodologies, but no investment strategy can guarantee returns or eliminate risk. Investors should carefully consider their investment goals, risk tolerance, and financial circumstances before investing.
For more detailed information about our strategies and associated risks, please refer to the full disclosures available on our website or contact an Allio Capital advisor.
For informational purposes only; not personalized investment advice. All investments involve risk of loss. Past performance of any index or strategy is not indicative of future results. Any projections or forward-looking statements are hypothetical and not guaranteed. Allio is an SEC-registered investment adviser – see our Form ADV for details. No content should be construed as a recommendation to buy or sell any security.
Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
This advertisement is provided by Allio Capital for informational purposes only and should not be considered investment advice, a recommendation, or a solicitation to buy or sell any securities. Investment decisions should be based on your specific financial situation and objectives, considering the risks and uncertainties associated with investing.
The views and forecasts expressed are those of Allio Capital and are subject to change without notice. Past performance is not indicative of future results, and investing involves risk, including the possible loss of principal. Market volatility, economic conditions, and changes in government policy may impact the accuracy of these forecasts and the performance of any investment.
Allio Capital utilizes proprietary technologies and methodologies, but no investment strategy can guarantee returns or eliminate risk. Investors should carefully consider their investment goals, risk tolerance, and financial circumstances before investing.
For more detailed information about our strategies and associated risks, please refer to the full disclosures available on our website or contact an Allio Capital advisor.
For informational purposes only; not personalized investment advice. All investments involve risk of loss. Past performance of any index or strategy is not indicative of future results. Any projections or forward-looking statements are hypothetical and not guaranteed. Allio is an SEC-registered investment adviser – see our Form ADV for details. No content should be construed as a recommendation to buy or sell any security.
Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
This advertisement is provided by Allio Capital for informational purposes only and should not be considered investment advice, a recommendation, or a solicitation to buy or sell any securities. Investment decisions should be based on your specific financial situation and objectives, considering the risks and uncertainties associated with investing.
The views and forecasts expressed are those of Allio Capital and are subject to change without notice. Past performance is not indicative of future results, and investing involves risk, including the possible loss of principal. Market volatility, economic conditions, and changes in government policy may impact the accuracy of these forecasts and the performance of any investment.
Allio Capital utilizes proprietary technologies and methodologies, but no investment strategy can guarantee returns or eliminate risk. Investors should carefully consider their investment goals, risk tolerance, and financial circumstances before investing.
For more detailed information about our strategies and associated risks, please refer to the full disclosures available on our website or contact an Allio Capital advisor.
For informational purposes only; not personalized investment advice. All investments involve risk of loss. Past performance of any index or strategy is not indicative of future results. Any projections or forward-looking statements are hypothetical and not guaranteed. Allio is an SEC-registered investment adviser – see our Form ADV for details. No content should be construed as a recommendation to buy or sell any security.
What We Do
What We Say
Who We Are
Legal
Allio Advisors LLC ("Allio") is an SEC registered investment advisor. By using this website, you accept our Terms of Use and our Privacy Policy. Allio's investment advisory services are available only to residents of the United States. Nothing on this website should be considered an offer, recommendation, solicitation of an offer, or advice to buy or sell any security. The information provided herein is for informational and general educational purposes only and is not investment or financial advice. Additionally, Allio does not provide tax advice and investors are encouraged to consult with their tax advisor. By law, we must provide investment advice that is in the best interest of our client. Please refer to Allio's ADV Part 2A Brochure for important additional information. Please see our Customer Relationship Summary.
Online trading has inherent risk due to system response, execution price, speed, liquidity, market data and access times that may vary due to market conditions, system performance, market volatility, size and type of order and other factors. An investor should understand these and additional risks before trading. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Past performance is no guarantee of future results.
Brokerage services will be provided to Allio clients through Allio Markets LLC, ("Allio Markets") SEC-registered broker-dealer and member FINRA/SIPC . Securities in your account protected up to $500,000. For details, please see www.sipc.org. Allio Advisors LLC and Allio Markets LLC are separate but affiliated companies.
Securities products are: Not FDIC insured · Not bank guaranteed · May lose value
Any investment , trade-related or brokerage questions shall be communicated to support@alliocapital.com
Please read Important Legal Disclosures
v1 01.20.2025
What We Do
What We Say
Who We Are
Legal
Allio Advisors LLC ("Allio") is an SEC registered investment advisor. By using this website, you accept our Terms of Service and our Privacy Policy. Allio's investment advisory services are available only to residents of the United States. Nothing on this website should be considered an offer, recommendation, solicitation of an offer, or advice to buy or sell any security. The information provided herein is for informational and general educational purposes only and is not investment or financial advice. Additionally, Allio does not provide tax advice and investors are encouraged to consult with their tax advisor. By law, we must provide investment advice that is in the best interest of our client. Please refer to Allio's ADV Part 2A Brochure for important additional information. Please see our Customer Relationship Summary.
Online trading has inherent risk due to system response, execution price, speed, liquidity, market data and access times that may vary due to market conditions, system performance, market volatility, size and type of order and other factors. An investor should understand these and additional risks before trading. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Past performance is no guarantee of future results.
Brokerage services will be provided to Allio clients through Allio Markets LLC, ("Allio Markets") SEC-registered broker-dealer and member FINRA/SIPC . Securities in your account protected up to $500,000. For details, please see www.sipc.org. Allio Advisors LLC and Allio Markets LLC are separate but affiliated companies. Allio Capital does not offer services to Florida.
Securities products are: Not FDIC insured · Not bank guaranteed · May lose value
Any investment , trade-related or brokerage questions shall be communicated to support@alliocapital.com
Please read Important Legal Disclosures
v1 01.20.2025
What We Do
What We Say
Who We Are
Legal
Allio Advisors LLC ("Allio") is an SEC registered investment advisor. By using this website, you accept our Terms of Service and our Privacy Policy. Allio's investment advisory services are available only to residents of the United States. Nothing on this website should be considered an offer, recommendation, solicitation of an offer, or advice to buy or sell any security. The information provided herein is for informational and general educational purposes only and is not investment or financial advice. Additionally, Allio does not provide tax advice and investors are encouraged to consult with their tax advisor. By law, we must provide investment advice that is in the best interest of our client. Please refer to Allio's ADV Part 2A Brochure for important additional information. Please see our Customer Relationship Summary.
Online trading has inherent risk due to system response, execution price, speed, liquidity, market data and access times that may vary due to market conditions, system performance, market volatility, size and type of order and other factors. An investor should understand these and additional risks before trading. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Past performance is no guarantee of future results.
Brokerage services will be provided to Allio clients through Allio Markets LLC, ("Allio Markets") SEC-registered broker-dealer and member FINRA/SIPC . Securities in your account protected up to $500,000. For details, please see www.sipc.org. Allio Advisors LLC and Allio Markets LLC are separate but affiliated companies. Allio Capital does not offer services to Florida.
Securities products are: Not FDIC insured · Not bank guaranteed · May lose value
Any investment , trade-related or brokerage questions shall be communicated to support@alliocapital.com
Please read Important Legal Disclosures
v1 01.20.2025