In the final hours before voting results start to emerge, we run this analysis by the bond fund giant about what, depending on different presidential and Congressional outcomes, will be the likely impact – if any – on financial markets.

Fixed income asset management house PIMCO weighed in on the implications of today’s elections by saying that for all the sound and fury of this year’s poll, there are fewer differences between Donald Trump and Kamala Harris than investors might expect – at least for now.

The firm, which oversees just over $2 trillion of AuM, said budget deficits will rise under either the Republican or Democrat candidate, and the gap between them will not greatly differ because of the narrow Congressional majorities they will have to contend with. The candidates must confront tax because tax cuts are due to expire in 2025 under the Trump Tax Cuts and Jobs Act of 2017 – and most, if not all, of these cuts will be extended. Harris and Trump will remain hawkish about China and the Federal Reserve’s independence will likely remain, whatever noises come from the Trump camp, the California-headquartered group said in a note

As explained here, the likelihood of a measure of divided government, and other checks and balances that come into play, will influence overall market direction in ways that are not always sufficiently appreciated amidst the 24/7 news cycle and controversies, both trivial and deadly serious, via social media and the regular press. We have also run articles and guest analyses on issues around tax, estate planning and even the issues confronting Americans living overseas.

PIMCO reinforced this relatively sanguine – if not optimistic – tone by noting that the largest differences between the candidates are on tariffs, which will remain high against Chinese imports if Harris wins, and rise further under Trump; the former president will also likely raise tariffs on other countries. If he wins, Trump will favor a lighter touch on regulation, and some rolling back of executive orders under the Biden administration. 

“In terms of the collective economic impact of each candidate’s policies, there are some tailwinds and headwinds under both, although for Trump given a president’s unilateral authorities over tariffs, there are more risks from both an inflation and growth perspective as it relates to tariffs,” PIMCO said. 

The organization has set out a chart of different scenarios and outcomes:

The Trump/Congress scenarios

The Harris/Congress scenarios

Source: PIMCO

(The editors at FWR will seek to capture the implications for our wealth management readers in coming days, cutting through the fog of this all as much as we can to deliver actionable ideas and content. To get in touch, email tom.burroughes@wealthbriefing.com.)