With the upcoming presidential election less than a month away, conversations about the future of the economy are at the forefront of political discussions. The election is about more than just who occupies the Oval Office—it’s about how the candidates’ economic policies will shape the country’s financial landscape for years to come. From inflation and interest rates to taxation and job creation, the election’s impact on the economy is far-reaching.
Before you cast your ballot on November 5, 2024, it’s important that you understand the relationship between presidential elections and economic outcomes, the key economic issues being debated in the current race, and how the election results could influence financial markets and your financial future.
The outcome of a presidential election has long been tied to shifts in economic policy and public sentiment. Throughout U.S. history, major elections have been won or lost based on economic factors.
Take the 1980 election, for example, when Ronald Reagan’s platform of tax cuts and deregulation appealed to an economy reeling from high inflation and unemployment. Similarly, Bill Clinton’s 1992 campaign famously focused on the phrase, “It’s the economy, stupid,” a strategy that helped him secure the presidency during a time of economic downturn.
More recent elections, like Barack Obama’s in 2008, were shaped by the financial crisis, with voters concerned about unemployment, the housing market, and government bailouts. Donald Trump’s 2016 victory was influenced by promises of tax reform and deregulation, which led to significant changes in corporate tax rates and market behavior.
These examples illustrate how economic issues can dominate the political landscape during an election, and the policies that follow can create ripple effects throughout the economy.
Below we identify the key economic issues in the current election and how each candidate plans to address the matter if in office.
A recent study by Statista found that the most important issue for 25% of Americans was inflation and pricing – the largest segment by far. Unsurprisingly, both republican and democratic candidates have in turn made inflation central to their pitch to voters.
One of the most talked-about tools is the Federal Reserve’s control of interest rates, which affects borrowing costs, consumer spending, and investments. In September 2024, the Federal Reserve cut interest rates by half a percent to support growth and stabilize a slowing labor market, with the likelihood of two additional cuts before year end. Typically inflation and interest rates move in the same direction, meaning if interest rates are up so is inflation. However, the recent slash in rates signals slowing inflation – a win, win for many Americans.
Each candidate has their own stance on what has caused record inflation and campaign promises on how to alleviate the financial burden on Americans. President Trump has vowed to cut down overall price levels and curb the independence of the Federal Reserve, while Vice President Harris unveiled a sweeping economic plan to ease inflation.
Job creation is always a focal point during elections and this year is no exception. Candidates often promise to create more jobs by investing in key sectors like infrastructure, green energy, and technology. Policies that focus on training workers for the jobs of the future—particularly in renewable energy and tech—are gaining attention as the economy shifts away from traditional industries.
The unemployment rate is often seen as a reflection of a president’s economic success, making job creation a vital issue in this election cycle. Yet neither candidate has divulged how they plan to tackle job growth other than to say they have each made incredible strides during their time in office.
The reality is that the unemployment rate is considered “healthy” at 4.1%. While low unemployment can be seen as a positive economic indicator, if the rate gets to be too low it can have unintended consequences, like higher inflation and reduced productivity.
Over the next few weeks, pay close attention to campaign promises centered around infrastructure investments or support towards emerging industries. Strategies like these aim to stimulate economic activity and foster an environment where businesses can expand and hire more workers.
Tax policy is another major issue at play–and one that garners much voter chatter. Candidates typically have contrasting views on corporate vs. individual taxation, and voters are keen to know how these policies will affect their wallets.
Both President Trump and Vice President Harris have come equipped with tax proposals and how it will affect your bottom line – let’s compare.
Vice President Harris has announced new tax and economic policies, where she intends to increase the corporate income tax rate to 28% and tighten rules related to estate tax. As for President Trump, he proposes imposing a baseline tariff on all US imports, exempting Social Security benefits from taxation, and exempting overtime pay from taxation.
While the two candidates tend to see differently in some areas, both have proposed exempting tip income from taxation and increasing the child tax credit – a win-win for Americans around the country.
You can read more on each of the candidates’ taxation agendas through Tax Foundation’s Tax Plan Breakdown.
It’s no secret that presidential elections can create volatility in the stock market. Investors often react to polling data and election outcomes, especially when there are sharp contrasts between candidates’ economic platforms.
Prudent Investors CEO, Jeremy Lau, recently remarked on election year stock performance. Jeremy shares, “Although stock returns have historically been a bit below average during election years, 2024 has been exceptional. The S&P 500 is having its best election year through the end of September since 1936.” He goes on to share that a report from the Leuthold Group noted that stock market performance 3 months prior to Election Day has been a strong predictor of presidential elections and has correctly identified 20 of the past 24 elections, proclaiming the incumbent party the White House winner.
The economy remains the single most important issue during the 2024 Presidential Election.
Though the economy has made improvements over the last year, as inflation reached its lowest level in more than 3 years and additional rate cuts are likely to continue, some Americans still feel uncertain about how either candidate will positively impact the economy and bring greater confidence in casting their ballot.
Though the research from Leuthold is a strong indicator of the Presidential successor, it’s not gospel. Voters should carefully consider each candidate’s economic platform and the potential long-term implications of their policies. How will their policies affect us from an individual stand-point and collectively as a union? Remember to follow reliable new sources, analyze policy proposals, and participate in discussions with your financial advisor to enhance your understanding of the potential economic impact of this year’s election.
As election season heats up, remain engaged and proactive in your investment approach to safeguard your financial future.
Investment advice through Prudent Investors, an SEC-registered investment advisor. This blog is general communication being provided for informational purposes only. This information is in no way a solicitation or offer to sell securities or investment advisory services. It is educational in nature and not to be taken as advice or a recommendation for any specific investment product or investment strategy. This does not contain sufficient information to support an investment decision. Any investment or investment strategy mentioned may not be suitable for all investors or in their best interest. Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources which we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All rights are reserved. No part of this blog including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Prudent Investors. Prudent Investors does not provide legal or tax advice. Please be advised to consult with your investment advisor, attorney or tax professional before making any investment decisions.
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