With the US presidential election approaching, a new piece of analysis from Peel Hunt has highlighted the potential impacts of a Trump or Harris administration on UK equities.
According to the investment bank, both candidates present a range of policies with mixed implications for the global economy, UK businesses, and certain high-exposure sectors.
Both candidates, however, pose risks to the UK stock market for contrasting reasons.
On the one hand, Trump’s protectionist mentality and associated tariffs are likely to hurt certain sectors, as will Harris’ proposals for higher corporation tax.
Whatever the outcome, this is a “crucial election” for the UK and the world as a whole, said Peel Hunt.
“Looking at the broad strokes, while both candidates have proposals that could provide some upside for certain sectors, their policy platforms, on balance, involve a series of anti-growth measures that, if enacted, could impair US economic performance and create risks for financial markets,” said the investment bank.
Trump’s policy proposals
Donald Trump’s economic agenda includes substantial import tariffs, particularly on Chinese goods, reduced corporate tax rates, and renewed investment in traditional energy sectors.
A Trump administration may introduce tariffs as high as 60% on Chinese imports, aiming to bolster domestic production but adding cost pressures for UK firms with heavy US import dependencies.
Trump also proposes lowering the corporate tax rate from 21% to 20% and additional tax cuts for domestic manufacturers, which could improve profitability for companies with US-based production, like Avon Technologies PLC (LSE:AVON) and Computacenter PLC (LSE:CCC).
In financial services, Trump’s policies may benefit banks with US exposure, such as Barclays, and institutions positioned to capitalize on volatility in US markets, including TP ICAP PLC (LSE:TCAP).
The proposed tariffs could also impact companies like Fevertree Drinks (AIM:FEVR), which relies heavily on imports to serve the US market, potentially increasing costs if supply shifts away from China.
Traditional energy companies, particularly those involved in fossil fuels, may see a resurgence under Trump’s ‘drill, baby, drill’ policy, reducing restrictions on oil and gas production and favouring companies like Diversified Energy Company PLC (LSE:DEC, NYSE:DEC), which has a 100% sales exposure to the US.
Harris’ Policy Proposals
Kamala Harris’ agenda emphasises green energy, corporate tax hikes, and fiscal policies supportive of the Inflation Reduction Act (IRA), aimed at decarbonising the US economy.
With proposals to raise the corporate tax rate to 28% and tax share buybacks more heavily, Harris’ policies could tighten corporate budgets and impact profits for multinational companies like Hill & Smith plc and Volex PLC (AIM:VLX), which have substantial revenue exposure in the US.
The renewable energy and new energy technology sectors could see a strong boost under Harris, benefiting companies like Ceres Power Holdings PLC (LSE:CWR, OTC:CPWHF) and SSE PLC (LSE:SSE), both of which have plans to expand into the US renewables market.
Harris supports extending and expanding clean energy tax credits, which may enhance the prospects of green technology and hydrogen-focused companies.
In media and advertising, Harris’ tax increases could reduce corporate spending, impacting advertising revenue for companies like GlobalData PLC (AIM:DATA) and Trustpilot Group PLC (LSE:TRST).
Conversely, tariff inflation under Trump could lead to lower consumer confidence, further curbing advertising budgets for brands dependent on consumer sentiment, such as M&C Saatchi PLC (AIM:SAA) and S4 Capital PLC (LSE:SFOR).
Impact on Key Sectors
- Financial Services: Trump’s lower corporate tax rate may benefit US-exposed UK banks, but market volatility under both administrations could also increase trading volumes, particularly for companies like TP ICAP.
- Industrials and Infrastructure: Trump’s focus on traditional infrastructure could support firms benefiting from public works, whereas Harris’ alignment with the IRA may sustain clean energy projects, creating opportunities for firms in the renewable sector.
- Media and Advertising: With inflationary pressures from tariffs under Trump and higher taxes under Harris, companies may experience mixed impacts based on consumer and corporate spending trends.
- New Energy and Clean Technology: Harris is likely to bolster the clean energy sector, aligning with the IRA’s objectives, benefiting UK companies in this space. Conversely, Trump’s potential rollback of green incentives may hinder growth in the renewables industry.