The election analysis provided by Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any candidate or political party.
As the presidential campaign has descended into an unprecedented exchange of personal attacks and scorched-earth tactics, it has begun to feel like the two candidates rarely say much about what they would actually focus on if they were elected.
But amidst the mud-slinging and name-calling, the second debate between Hillary Clinton and Donald Trump did feature discussions of several issues important to investors, including two issues—health care and energy—that received almost no attention during the first debate.
While commentary on the scandals that have roiled the race is easy to find, at Schwab we are trying to keep our eye on the implications for investors. To that end, here’s a brief summary of where the candidates stand, based on their comments on the campaign trail and in the debates, on several issues of importance to investors:
- Infrastructure spending. One of the few areas of common ground between Hillary Clinton and Donald Trump is that both have said they will prioritize major spending on infrastructure should they be elected. By some estimates, the United States needs to spend at least a trillion dollars over the next decade to improve the nation’s roads, bridges, airports, power grid and other infrastructure.
Both candidates believe that infrastructure spending can help stimulate economic growth and create new jobs. Trump has said he would launch a trillion-dollar spending program focused on repairing roads and bridges. Clinton has promised that she would ask Congress to approve a $275 billion infrastructure spending program within her first 100 days in office. Both candidates have indicated that they would not raise the gas tax to pay for such a large spending program, though most economists think a gas-tax increase is inevitable.
One thing to note is that such spending has a real chance of success in a divided Congress. Both Republicans and Democrats on Capitol Hill support infrastructure investment, so compromise may be possible.
- Financial regulation. The two candidates differ significantly on how to handle Wall Street.
Clinton has proposed a “bank tax” on the largest financial institutions and has also called for a financial transaction tax, a small fee on stock and mutual fund transactions. The latter has little chance of success. While legislation introducing such a tax has been floating around Congress for years, it has never gathered more than a handful of supporters. Even President Obama has opposed it.
Clinton also favors maintaining the Dodd-Frank Act, the law that overhauled financial regulation in the wake of the 2008 financial crisis, though she has acknowledged the need for some fixes. She has also called for “strengthening” of the Volcker Rule, a part of the Dodd-Frank law that prohibits financial institutions from engaging in proprietary trading. And she favors increased regulation of the so-called “shadow banking” sector, including hedge funds, insurance companies and asset managers.
Trump has proposed repealing most of Dodd-Frank, calling it a key reason for the slow recovery from the financial crisis. But Trump has also supported bringing back the Glass-Steagall Act, the Depression-era law that separated banking activities from securities activities but was repealed in 1999. That’s a stance that has surprised many Republicans. After all, restoring Glass-Steagall was a cornerstone of the campaign of Senator Bernie Sanders, D-Vt., who challenged Hillary Clinton in the Democratic primary.
One area of commonality between the two candidates: Both support taxing “carried interest”—a strategy used by hedge-fund and other asset managers to receive their pay as a percentage of partnership profits rather than a salary or bonus—as ordinary income, rather than as capital gains.
- The Federal Reserve. Clinton has called for more minorities and women to be appointed to key positions at the Fed, and has also pushed for private bankers to be removed from the boards of the 12 regional Fed banks. She has not commented on whether she would ask current Federal Reserve Board of Governors Chair Janet Yellen, whose term expires in 2018, to stay if she were elected.
Trump has been critical of the Fed, arguing that the central bank has been influenced by the White House to keep interest rates low and indicating he would replace Yellen as chair if he won the White House. Trump has also supported attempts—thus far unsuccessful—by Congressional Republicans to force a comprehensive audit of the Fed.
- Energy. Energy policy, an issue critical to many voters, finally received its first substantive discussion in the final minutes of the second debate.
Clinton has set a goal of generating half of all electricity used in the United States from renewable resources by the end of her first term. On coal, Clinton has proposed a $30 billion program to help coal-mining towns change their economies, but she doesn’t support any increases in coal production. She supports the production of natural gas, including through hydraulic fracturing, or “fracking,” as a “bridge” to more dependence on renewable fuels.
Trump has made restoring fossil fuels a key plank of his platform, saying he would “bring back” the coal mining and steel manufacturing industries. He supports the building of the Keystone Pipeline, which was approved by Congress in 2015 but vetoed by President Obama. He has offered tepid support for alternative sources of energy but has said the country shouldn’t favor renewable energies to “the exclusion of other forms of energy.” Trump has also voiced strong support for fracking and said he would lift restrictions on oil drilling on federal lands.
- Trade. Trump has made his disdain for U.S. trade policy and international trade agreements a cornerstone of his campaign. He opposes the Trans-Pacific Partnership (TPP) and has called for repealing and renegotiating the North American Free Trade Agreement (NAFTA). His “get tough” rhetoric on China and Mexico has sparked concerns about a trade war with both countries.
Clinton’s position on trade has evolved. While she was once a strong free-trade advocate, she has become more skeptical during the presidential campaign. On TPP, a proposal she once supported, she has said on the campaign trail, “I oppose it now, I’ll oppose it after the election and I’ll oppose it as president.” But she continues to support NAFTA.
- Taxes. We published a detailed look at the differences between the two candidates on tax issues last month. Clinton’s plan calls for a surcharge on the wealthiest filers, an increase in the estate tax and a new sliding scale of rates for capital gains. Trump has supported a plan floated by Congressional Republicans that would cut taxes across the board, reducing the current seven tax brackets to three. He also favors repealing the estate tax.
This is just a sample of the issues that may affect the markets. Among the aspects of the election that are provoking anxiety among investors is uncertainty around which issues will be prioritized in 2017, as well as the broad differences between the two candidates and how they would approach governing.
But, as we have been saying for months, the president’s ability to change national policy on his or her own is limited. Ultimately, it is Congress that will make the decisions on most of these issues. We continue to believe that Congress—particularly the Senate – will remain narrowly divided in 2017, and that this will act as a significant impediment to rapid, market-moving policy changes. Whoever wins the White House will need to find ways to compromise and build consensus—potentially a big challenge for both candidates.