The policy uncertainty highlighted by the rise in US executives' election talk

U.S. executives are more concerned about the presidential election this year than they were four years ago. A wider policy divide between Donald Trump and Kamalah Harris raises concerns over taxes, tariffs, and pricing power.

According to a LSEG Workspace screen on S&P 500 companies, mentions of the "election" and "White House" in earnings calls were 34% more than they would have been for the corresponding period of 2020.

According to a separate FactSet analysis, tariffs, trade, and the Inflation Reduction Act were the top policy topics discussed by companies that cited "elections". This was followed by energy, carbon emissions (including renewables, electric vehicles), and the Inflation Reduction Act.

Sam Stovall is the chief investment strategist of CFRA Research. He believes that the increased discussion about the election during earnings calls may be due to the fact that the policy differences are more pronounced now than in the 2020 race.

Stovall stated that "Company profits may be materially affected, depending on the party winning the White House and in particular if there is a blue wave or a red wave."

Investors said that Harris' unexpected rise to the top spot on the Democratic ticket after President Joe Biden dropped out of the race late in July added another layer of unpredictability.

We have a good idea of what Trump's plan is, but are less certain about Harris' plan. Robert Pavlik is a senior portfolio manager with Dakota Wealth Management. He believes that the administration will be a continuation of Biden's, but slightly different.

Trump, the Republican candidate for president, has made no secret of his desire to tighten trade restrictions. He has promised to impose tariffs on Chinese products that are 60% or more. He also floated the concept of a universal 10% tariff.

Citi Research stated in a report that tariffs and corporate taxes were the most important factors for U.S. equity. Higher corporate taxes also pose a greater risk to earnings.

David Wagner, portfolio director at Aptus Capital Advisors, said: "It's all about taxes... That's what kills this market."

The new corporate tax rate has an immediate impact on earnings growth. This is why many companies are starting to discuss this issue to stay ahead of the game.

If she wins the election in November, Harris proposes to raise the corporate tax rate from 21% to 28 %.

Trump has promised to make these tax cuts permanent. He lowered the rate from 35% to 21% during his tenure and introduced other tax breaks that will expire in the next year.

Companies find it hard to predict the outcome of the race because it is so close. An Ipsos survey conducted from August 2-7 found that Harris led Trump by 42% to 37%.

James Fitterling, CEO of Dow Inc, a U.S. chemicals company, said that he did not believe any companies or individuals had started stocking up ahead of possible tariffs. "I think nothing has begun yet... primarily due to the uncertainty surrounding the election and which policies will actually stick," he added.

Some firms have made plans for how they will react to the outcome of the election. Tarang Amin, CEO of cosmetics company Elf Beauty, said that the firm will raise prices if Trump wins because it would pass on the costs from higher tariffs.

Amin stated that "we don't like the 60% tariff because we think it is a tax imposed on American consumers."

Newell Brands, the maker of Sharpie pens and kitchen appliances, is shifting some production out of China due to tariff uncertainty. CEO Chris Peterson said this.

The outcome of the election could have a major impact on companies in energy and electric vehicles sectors.

Harris is expected to follow Biden's energy policies and support his landmark IRA while Trump will likely undo most of it.

Trump said that he'd also consider eliminating the $7,500 tax-credit for electric vehicle purchases.

The ability of the administration to implement policies will depend on Congress's support.

Thomas Hayes, Chairman and Managing Member at Great Hill Capital, LLC, said, "The key is who controls the House of Representatives and the Senate, regardless of who the president is."

(source: Reuters)