As the American economy goes, so goes the stock market. At least that is generally the case. When the economy is strong, corporate profits rise. And when profits rise, stocks tend to rise.
With the presidential election just around the corner, many investors are understandably interested in how the policies of the two leading candidates might affect the economy. Will Kamala Harris or Donald Trump be better for the economy? Here’s what a top Wall Street analyst says.
The clear winner, according to Goldman Sachs
Goldman Sachs (NYSE: GS) is a financial services company with operations around the world. It is a leading investment bank and offers asset management services. Due to the intersection of politics and business, the firm recently evaluated the potential impact of proposed economic policies from Harris and Trump.
There is a clear winner between the two, based on how their policies would impact the U.S. economy, according to Goldman Sachs. That’s Kamala Harris.
The Wall Street firm predicts that under a Harris administration with Democratic control of Congress, jobs would grow by about 10,000 more per month than if Trump wins with a divided Congress. A Harris win would create 30,000 more jobs per month than a win in which Trump becomes president and the GOP controls both the Senate and the House.
Analysts at Goldman Sachs also predicted that Trump’s economic plans would reduce gross domestic product (GDP) by about 0.5% in the second half of 2025. However, they expect this negative impact on GDP to diminish from 2026 onwards.
Why Wall Street Firm Views Harris’ Policies More Favorably
Vice President Harris has proposed economic policies including expanded child tax credits, prohibitions on loan sharking, tax breaks for first-time home buyers and an increase in the corporate tax rate from 21% to 28%. She also recently called for raising the long-term capital gains tax rate to 28% for Americans making $1 million or more and up to a $50,000 tax deduction for new small businesses.
Former President Trump wants to cut the corporate tax rate to 15%. He is proposing tariffs of at least 10% on all imports, with tariffs of 60% on imports from China. Trump also plans to reduce government regulations to help businesses. His idea of a mass deportation of illegal immigrants could also have an economic impact.
Goldman Sachs is positive about Harris’ proposed spending initiatives and middle-class tax credits. The firm predicts that these plans would “more than offset investment from higher corporate tax rates.” The result, Goldman Sachs says, is that a Harris administration with a Democratic Congress would boost GDP growth somewhat in 2025 and 2026.
However, the Wall Street firm has a negative view of Trump’s economic proposals. Analysts at Goldman Sachs wrote to investors earlier this week: “We estimate that if Trump wins in a sweep or by [divided] According to the government, the impact on growth from tariffs and stricter immigration policies would offset the positive fiscal boost.”
What is the potential impact on investors?
Not everyone agrees with Goldman Sachs’ view. The Trump campaign responded to a question from Bloomberg: “[T]These Wall Street elites would be wise to review the facts and acknowledge the shortcomings of their previous work if they want their new forecast to be seen as credible.”
Not surprisingly, the Harris campaign liked Goldman Sachs’ analysis. They released a statement saying, “Vice President Harris has a positive vision to strengthen the economy by building the middle class, cutting taxes and costs for working families and small businesses, and creating opportunities for all Americans to get ahead.”
What is the potential impact on investors if Goldman Sachs’s view is correct? The simple answer is that it depends on who wins in November. But the stock market has historically risen during both Democratic and Republican administrations. For long-term investors, who will occupy the Oval Office over the next four years will not matter nearly as much as the quality of the stocks they buy and how long they hold them.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.
Will Kamala Harris or Donald Trump Be Better for the Economy? Here’s What a Top Wall Street Analyst Says Originally published by The Motley Fool
