24 questions for the 2024 US elections

Can a US president impose tariffs on other nations without restriction? How might the economy react to the imposition of such tariffs?

Yes, with few constraints. Congress has exclusive authority “to regulate Commerce with foreign Nations” but has delegated more authority to the executive branch of government to manage trade with other nations.⁴ The president’s authority to impose a tariff now rests on either the preservation of national security or as a response to unfair trade practices by other nations. There are restrictions on presidential authority, but they are not particularly onerous. The relevant statutes require consultation with Congress and impose some limits on the duration of the levy and the process by which they are introduced.

America’s two political parties are generally aligned on the issue of global trade. Regardless of who wins in November, the use of tariffs as a tool by which leverage may be exerted on trading partners is likely to continue. Former President Trump may rely on the broader application of tariffs as a foreign policy tool; Vice President Harris is more likely to use them in a targeted manner against geopolitical rivals.

Tariffs are a tax on the consumer of imported products. They are also inflationary in the short term. When targeted toward specific products from a single trading partner, the impact on the aggregate economy is generally limited. When applied more broadly, the imposition of tariffs runs the risk of reciprocal action that suppresses global commerce and distorts global supply chains. For more, see our 3 September report, “The economic and investment implications of higher tariffs.”

Can a US president withdraw from treaties and alliances without the consent of Congress?

It’s unclear. This question has arisen more frequently in the wake of former President Trump’s admonition that North Atlantic Treaty Organization (NATO) allies were not paying their fair share of the alliance’s costs. The US Constitution empowers the president to execute treaties with other nations “provided two thirds of the Senators present concur” but does not assign responsibility for the termination of treaties.⁵ The ambiguity led Congress to pass a statute in 2023 that expressly prohibits any president from withdrawing from NATO or using funds appropriated by Congress for that purpose unless two-thirds of the Senate concurs or pursuant to an Act of Congress.⁶ The legislation did not address other treaties.

Does the president have the power to commit US military forces without the consent of Congress?

This question often arises when regional disputes around the world threaten to ensnare the US or its allies in a kinetic conflict. While Congress has the unilateral power to declare war and initiate hostilities against another nation, it has not done so since 1942.⁷ The president is vested with plenary authority over the disposition of military forces and the preservation of national security. The War Powers Resolution of 1973 imposes some conditions on the use of military force by the president but subsequent chief executives from both parties have claimed constitutional authority to deploy military forces to deter threats to the US without reliance upon congressional approval.

Is the US president empowered to order the deportation of undocumented individuals?

The US Constitution endows Congress with the authority to establish uniform rules by which individuals may become citizens but is silent on the power to deport them.⁸ However, Supreme Court decisions have affirmed the right of Congress to “exclude aliens from its territories” and concluded that the right to expel or deport foreigners…is as absolute and unqualified as the right to prohibit and prevent their entrance into the country.”⁹

In 1952, Congress enacted the Immigration and Nationality Act over President Truman’s veto. The Act conveyed to the president the power to “suspend the entry” of any individual who “would be detrimental to the interest of the United States.”¹⁰ In a subsequent case, the Supreme Court concluded that the federal government could deny an entry visa without providing the applicant with a reason for the rejection.¹¹

Former President Trump has pledged to engage in the “largest deportation effort in American history.” The power of the executive in areas associated with immigration is expansive. However, there are numerous practical obstacles, not the least of which is an insufficient number of immigration agents, hearing officers, and detention facilities after years of inadequate funding. Further litigation is likely.

Which contests are likely to determine control of the Senate and House of Representatives?

Regardless of which party controls the Senate and the House in the 119th Congress, the margin is likely to be very slim. In the Senate, the key races we are watching are those in Montana, Ohio, Pennsylvania, Nevada, Arizona, Wisconsin, and Michigan. Democrats are defending seats in these states. Two seats currently held by Republicans, in Texas and Florida, will be actively contested by both parties but the GOP retains a polling advantage.

Democrats are optimistic about their chances to assume control of the House because Republicans occupy 17 districts won by President Biden in 2020, while Democrats hold just five districts won by former President Trump.¹² House races tend to be more idiosyncratic than those in the Senate, but voter turnout for the presidential race will be an important factor. If either Trump or Harris wins by a larger-than-expected margin, their respective party will likely gain control of the House.

Has polling become less accurate in recent elections?

Public confidence in opinion polls has declined over the past eight years. Donald Trump’s unexpected victory in 2016 and Joe Biden’s narrower-than-expected win in 2020 forced the industry to reexamine its canvassing methods. According to the American Association of Public Opinion Research, the 2020 polling errors were the highest in 40 years.¹³ Polls conducted exclusively by land lines have given way to a combination of online, mail, wireless communication, and greater use of probability sampling.

It is worth noting that the accuracy of polls was greater in the midterm elections in 2018 and 2022 than in recent presidential contests, which suggests that the presence of Donald Trump on the ballot might have a tangible impact on polling accuracy. The ability of the former President to turn out voters at the polls who otherwise do not vote regularly or respond to pollsters’ inquiries may be the critical difference.

How secure are mailed ballots?

The practice of using the mail to record votes is not new; active duty military members and the US diplomatic corps have been voting by mail for decades. But it has certainly become more commonplace. According to a study by the Massachusetts Institute of Technology, 32% of all votes across the nation in 2022 were submitted by mail.¹⁴ Eight states and the District of Columbia now conduct all elections exclusively by mail.¹⁵

State governments have taken steps to reduce the potential for fraud by mailing ballots only to registered voters. Ballot envelopes are barcoded and only one ballot per registered voter is ever counted. Signature identification is used by a majority of states to verify eligibility and stiff criminal penalties are assessed for election interference. A study by the Heritage Foundation identified only 15 instances of attempted fraud out of 15.5 million ballots cast in Oregon between 1998 and 2020.¹⁶

The timely delivery of mailed ballots by the US Postal Service (USPS) is critical. The National Association of State Election Directors has urged the USPS to improve its delivery performance in advance of this year’s election.

Does early voting affect election outcomes?

The opportunity to vote early in presidential elections is increasing. Voters in 15 states will have the opportunity to begin doing so by October 10. However, the availability of early voting as an option does not appear to have a significant impact on outcomes. Prior to 2020, registered Republicans opted to vote early more frequently than did Democrats. Former President Trump’s criticism of the practice may have been a factor in changing the narrative; registered Democrats voted early in greater numbers in 2020.¹⁷

Do third-party candidates affect the outcome of presidential elections?

Third party candidates have had a pronounced impact on the results of presidential elections in only a handful of instances. Ross Perot garnered 18.9% of the popular vote in 1992, for example, which was the best result for a third-party candidate since Theodore Roosevelt 80 years earlier. While he did not win any electoral votes, his presence may have been a factor in Bill Clinton’s victory in the presidential election, which Clinton won with only 43% of the popular vote (to George H.W. Bush’s 37.4%). Eight years later, Ralph Nader’s presence as an independent candidate may have cost Al Gore the 2000 election. Nader received more than 97,000 votes in Florida, which George W. Bush won by only 537 votes. Nader received more than 22,000 votes in New Hampshire, which Bush won by a little more than 7,000. 

The withdrawal of Robert F. Kennedy, Jr. is noteworthy but may not have the same impact as the foregoing examples. He was draining support from both Biden and Trump prior to the former’s withdrawal from the race. Harris’ entry and subsequent nomination may have contributed to deterioration in RFK Jr.’s poll numbers, which were halved in relatively short order. Some of his remaining support may transfer to former President Trump but it is by no means clear that this will happen in large enough amounts to alter the dynamics of the current race.

Why does the US have an Electoral College in lieu of a popular vote for president?

The use of “electors” was the result of a political compromise at the Constitutional Convention in 1787. Some delegates to the Convention believed that either the Congress or state legislatures should elect the president. Others preferred a popular vote. While northern and southern states had equivalent populations, enslaved individuals made up about one third of the population in southern states. As a result, a direct popular vote by white propertied males might have favored the north. The compromise allowed three out of five slaves to be counted toward the population of a given state, with a consequent increase in the number of southern electors.

The origins of the Electoral College are ignominious, but it has survived for a number of reasons. Those in support of its retention argue that it encourages presidential candidates to form a broader political coalition and increases the probability that a candidate will pay closer attention to less populous states and states with smaller urban populations.

What happens if no candidate gets 270 electoral votes?

If no candidate receives 270 votes, the presidential election moves to the House of Representatives, where each state’s delegation is allowed a single vote. The District of Columbia does not vote in this instance. The state delegations must choose from the three candidates who received the most electoral votes for president. The Senate elects the vice president from the two candidates who received the most electoral votes. If the House fails to elect a president by Inauguration Day, the vice president-elect serves as acting president until the deadlock is resolved.¹⁸

Could either candidate contest the presidential election results?

Federal elections are managed by state governments, so the process of disputing the results is defined by each state’s own statutes. Some states require an automatic recount if the result is close. Candidates are also free to contest the outcome through litigation, which can take place in either state court or the federal district court, depending upon the plaintiff’s argument.

How has the US equity market performed in presidential election years, and does party affiliation of the US president matter?

Only two dozen presidential elections have been held since 1928, so there are too few data points to draw a statistically defensible conclusion regarding the political impact of one party or another’s victory on market behavior. Moreover, the data referenced by pundits often rely on calendar-year performance. This can be misleading because the incumbent executive occupied the presidency for the entire calendar year in which the election occurred. While the result of any election might have a temporary impact on equity market sentiment, a credible argument can be made that the incumbent president bears as much responsibility, or more, as the newly elected individual for market performance when a change of administration occurs.¹⁹

Returns are similar regardless of the winning party

Average S&P 500 total returns, excluding 2008

How do we expect the energy sector to perform based on the election results?

Since 2018, the US energy industry has become focused on capital discipline, which attempts to maximize returns on invested capital and maintain a longer-term perspective on commodity prices and capital spending. All of this has modestly shifted how companies react to changes in short-term commodity prices, different administrations, and regulations. As a result, we do not expect a wide variation in energy stock performance to either potential election outcome. 

Looking at the specific election outcomes, a Red Sweep would pose slightly lower legislative and regulatory risks to the fossil fuel energy industry, which could see additional consolidation and higher exports of natural gas. A Harris administration would likely be neutral to slightly negative for the fossil fuel energy industry given the potential for additional regulations. However, we expect a Harris administration would represent the status quo with respect to regulatory oversight of the energy industry. Some focus on renewable energy will likely remain in either election outcome and we are not expecting a repeal of the Inflation Reduction Act (IRA).

Keep in mind that oil markets appear slightly oversupplied looking out to the beginning of 2025, and spare capacity from OPEC+ nations is likely to keep the prospect of global crude oil supply continuing to exceed demand as a key investor focus. Global oil demand has proven resilient, though Chinese demand has been modestly weaker than expected.

How do we expect the financial sector to perform based on the election results?

We expect that a Trump administration would be positive for the financial services industry while a Harris administration would likely be neutral to negative. 

In our view, there are three main election risk factors for US financials, namely: legislative risk, regulatory risk, and headline risk. While there could be some targeted bills in areas like Government Sponsored Enterprise reform, we believe legislative risk remains modest given the wide-ranging scope of the 2010 Dodd-Frank Act. It also seems likely that the currently high degree of headline risk will not change much—especially under a divided Congress scenario. Accordingly, in our opinion, the main risk consideration based on the election results is regulatory risk as any new administration would likely nominate new heads of the various regulatory agencies that oversee the financial services sector. We believe a Trump administration would likely nominate regulatory heads who are less likely to interpret existing (or impose new) regulations that add to sector compliance and capital costs. 

Personnel is policy. New regulatory heads at the Fed, FDIC, OCC, CFPB and other agencies could hold fewer negative views about the financial sector’s role in the broader US economy. This could involve a lighter-touch supervisory regime and fewer regulatory orders and penalties. Accordingly, the overall regulatory burden including the cost of compliance and balance sheet requirements for liquidity and capital could be eased somewhat. Also, we believe the Consumer Finance Protection Bureau could be more restrained under a new administration, potentially lowering the risk of fines and costly corrective measures. Finally, new regulatory leadership could lessen or even reverse the anti-consolidation pressures that have emerged in recent years. In particular, we believe the significant excess capacity in banking (with over 4.300 chartered US banks) could lead to more strategic as well as scale-driven consolidation of smaller and mid-sized US banks.

How do we expect the tech sector to perform based on the election results?

The chip industry has been the center of geopolitical tensions between mainland China and the US for a number of years and for good reason: semiconductors are the foundational technology that drives global economic development with significant implications for cybersecurity and national defense.

No matter the election outcome, we expect export restrictions on semiconductor technology to continue, ranging from semiconductor manufacturing to finished chips. In our view, this is the one technology issue that has bipartisan and bicameral support. We see the potential for further action on shipments of manufacturing tools into mainland China, along with a strong probability of further limits on the shipments of advanced semiconductors, with the potential for efforts to cut off “gray market” supply that has circumvented US rules.

This further tightening of semiconductor policy, along with the potential for increased tariffs under a Trump Administration, could have knock-on effects. China may promote a policy that encourages domestic brands in hardware to the detriment of US companies. Additionally, tariffs could have a dampening effect on demand as any increase in tariffs would likely be passed on to final consumers given the thin margins in most hardware companies.

The expected ultimate impact of enhanced technology restrictions would be partially offset by shifting production. We have already seen an increase in semiconductor fab construction outside of the Southeast Asia region, and this could accelerate. At the same time, the global hardware supply chain would likely rebalance production to areas not subject to tariffs. While the financial impact is likely manageable, we believe that the semiconductor and hardware industries could see increased volatility.

Is tax policy likely to change after the election?

Yes. Congress will need to address the expiring provisions of the Tax Cuts and Jobs Act in 2025. Former President Trump is adamant that the expiring personal tax cuts be made permanent. He also has expressed support for a lower corporate tax rate and a lower payroll tax rate. Vice president Harris has argued that tax cuts be made permanent only for those Americans earning less than USD 400,000 per year. She also has expressed support for a higher corporate tax rate.

The ability of the two candidates to enact these policies will depend upon the composition of the next Congress. In a Red Sweep, where the GOP controls both chambers, the tax cuts are highly likely to be made permanent. In a Blue Sweep, where Democrats control the flow of legislation, we expect personal and corporate taxes rates to increase. An expanded child tax credit and a permanent earned income tax credit are also likely. The scenarios become more complicated if the Congress is divided. In that case, we believe Democrats will hold a slight edge in tax bill negotiations because a failure to take any action will trigger a reversion to higher tax rates in 2026.

What is the outlook for the US dollar under various election outcomes?

The dollar faces a mixed outlook under the different macroeconomic reactions to the election outcomes. Increased taxes on higher-income households in a Harris presidency, as well as a potential nudge higher to the corporate tax rate, represent a modest negative for economic growth. To the extent this is disinflationary and leads to somewhat larger Fed rate cuts, this would be a slightly negative for the dollar. Under a second Trump administration we would have a range of offsetting macro policies. An extension of the personal tax cuts and a cut to corporate taxes would prove positive for the economy. Along with strict immigration policies and higher tariffs, inflationary pressures would likely increase, resulting in fewer Fed rate cuts. While a Trump administration and especially a Red Sweep could be positive for the dollar, at least initially, higher deficits and trade tensions could eventually undermine the dollar.

If I am worried about the market reaction to an election outcome, how do I protect my portfolio?

We are obliged to remind our readers that portfolio management is best treated as an apolitical exercise. A well-constructed portfolio management plan will be able to withstand the market volatility following the results of a close election, and a reduction in equity exposure in the wake of a disappointing election outcome is likely to be counterproductive over the longer term. With that important caveat, an investor eager to protect a portfolio from short-term fluctuations in value can pursue an option strategy that locks in gains now or limits the magnitude of a potential loss. Structured notes are another alternative, which can preserve existing gains in return for a willingness to forego future growth for some period. Gold can be an effective hedge against concerns over geopolitical polarization, the US fiscal deficit, or a weaker US dollar. In all instances, clients should consult their financial and tax advisors.