There continues to be uncertainty around what will happen in the upcoming election, and uncertainty over presidential policies may continue into early next year — so for now the best advice is for advisors and their clients to make plans based on financial goals, not who’s in the White House, according to Wells Fargo analysts.
But one big policy issue that hinges on election results is taxes, they said Monday during a Wells Fargo Wealth & Investment Management client call.
Even if there is a Democratic sweep in the elections, investors should not expect huge tax increases soon, according to Paul Christopher, head of global market strategy for Wells Fargo Investment Institute. Both parties will likely be focused initially on improving the economy, he says.
For now, it seems likely the Democrats will retain control of the House, he also said. And he predicted Senate control will go to whichever party wins the White House.
“Single-party control by the Democrats is the more likely of the two scenarios, but we do not foreclose the possibility of a Trump win and control of the Senate [staying] with the Republicans,” he said.
“We do expect that taxes will rise if we have single-party control under the Democrats,” Christopher said, adding: “Delay, dilution and defeat are typical in tax reform [and] we should expect that next year” if the Democrats take control and push for tax changes.
Democratic tax proposals may include restoring the 39.6% individual income tax rate on incomes over $400,000 from 37% (as Joe Biden has proposed) or taxing capital gains as ordinary income, he said.
More Similarities Than Many Think
It is also important to note that despite the large tax and other policy differences between the two political parties, the ongoing pandemic and economic situation “creates trends that no president or party can ignore, and these trends also make for more similarities between the two parties than many people acknowledge,” Christopher said.
For example, “in order to support the economy, both parties favor expensive government spending, principally on health care and infrastructure spending,” he pointed out. And that creates “investment opportunities,” he noted, adding both parties also “want to renew U.S. manufacturing” and “get tough with China.”