Nevertheless, there are clear differences in their policy direction that are likely to have an impact for US citizens across the globe.
Keith Wade, chief economist at Schroders, says: “A Trump victory would be very important for investors. He has very important fiscal and trade plans and he wants to cut tax and spending. I am less concerned on his fiscal plans, because congress will probably rein him back on those, but he will have more freedom to direct trade policy, which could see increased tariffs to China and Mexico. This is likely to be quite stagflationary and damaging.”
Among Trump’s pledges is an ‘across-the-board’ tax reduction for working and middle-income Americans, a repeal of the death tax and a lowering of business tax rates from 35% to 15%.
He also proposes a one-off tax rate of 10% for offshore corporate profits brought onshore. Of the rich, he says: “We will ensure the rich will pay their fair share, but no one will pay so much that it destroys jobs or undermines our ability to compete.”
He has promised to kill the “carried interest” tax loophole that benefits hedge fund managers and similar businesses.
He has also made it clear that he wants to cut spending. This includes cuts to infrastructure projects. He has been critical of monetary policy and the Federal Reserve.
Targeting infrastructure
Hillary is a little more circumspect. She also wants to kill the ‘carried interest’ loophole and “Make certain that corporations, the wealthy, and Wall Street pay their fair share”. She plans to impose a new surcharge on multi-millionaires and billionaires, but isn’t planning any big giveaways for middle income families.
Instead, her fiscal policies are likely to target infrastructure spending rather than tax cuts.
This will have implications for adviser recommendations and may see some significant changes to the tax rules if either side gets their agenda through, but are there likely to be any implications for financial advisers themselves?
Neither Clinton nor Trump has any explicit policies on the financial advice market. Nevertheless, Trump has declared himself firmly ‘anti-regulation’ – he has plans to repeal parts of Dodd-Frank, for example, which restricts the ways banks can invest, limiting speculative trading and eliminating proprietary trading. He has said: “Every year, over-regulation costs our economy $2 trillion dollars a year and reduces household wealth by almost $15,000 dollars.” The maths may be open to question, but the basic thrust of policy is clear.
Clinton may be more minded to persist with Obama’s reform of the advice market, started in April of this year. The Obama administration announced new regulations requiring financial advisers to put the interests of the client over their own. The principle may seem uncontroversial, but critics suggested it would make financial advice more costly and lower earners would be left without advice.
The new ‘fiduciary standard’ stopped short of banning commission altogether, but aims to prevent advisers steering clients into more expensive products to charge big fees, a practice estimated to cost as much as $17bn. At the time, Treasury Secretary Jack Lew said the new regulations were “an important step toward ensuring that Americans who invest their hard-earned retirement savings receive advice that is in their best interests.”
In general Clinton has shown herself to be more focused on regulation, planning to expand Dodd-Frank regulation for banks and modernise the Glass-Steagall Act. She also plans a ‘risk fee’ for larger institutions.
Lack of enthusiasm for both candidates
Andrew Goldberg, global market strategist at JP Morgan Asset Management, says that markets are unlikely to welcome either candidate with enthusiasm, but the checks and balances within the US government mean that both will struggle to get their agenda through.
He says: “A quick Google search for the phrase “Congress watered down” reveals a battery of purportedly “watered-down” bills on taxes, privacy, foreign policy, financial regulation, tax reform, immigration and, for that matter, health care. In other words, investors shouldn’t measure market prospects based on the raw proposals they hear during the campaign season.”
Didier Saint-Georges, managing director and member of the investment committee at Carmignac says that the best case scenario may be an unpopular president in the White House (Clinton), elected primarily as a protest against her Republican rival, who would be unable to pass her budget stimulus plans; that said, the potential geopolitical tensions created by her rival may do more damage in the longer-term.
It has been a murky election and the outcome is unlikely to give significant clarity.
