US Presidential Election Impact on Financial Services Industry

The Economist Intelligence Unit (EIU) held a public webinar on August 14 about the potential impact of the upcoming US presidential election on financial services regulations. 

EIU Director of Industry Analysis Ana Nicholls, Lead Analyst Swarup Gupta and Analyst Shashank Nayar discussed the economic policies of both presidential candidates, highlighting their differences in approach. 

They also discussed the potential effects of a Donald Trump presidency on capital markets, crypto currencies and the financial services sector, including challenges faced by the Neon project in Saudi Arabia. Overall, the conversation emphasized the geopolitical risks associated with a second Trump term, including protectionism, isolationism and political volatility.

The EIU will keep its forecast of a Trump victory under review and be prepared to change its prediction if Harris’ campaign momentum continues into November.

Here are some of the highlights: 

US economic policies under a potential Trump presidency, including inflationary effects and impact on the dollar.

• Trump’s economic policies may lead to higher inflation and reduced economic growth.
• Expectations for US dollar value are mixed, with some predicting attempts to weaken it under Trump.
• Trump’s economic policies may lead to higher inflation and a stronger US dollar, contradicting his campaign promises.

Banking regulations, private equity and tax policies under Biden and Trump administrations.

• US banks to face 16% capital increase by July 2022, with G-SIBs needing 19% increase.
• Banks pushing for rule easing or extension, with Fed and FDIC officials open to changes.
• Trump’s administration could ease compliance standards for smaller banks, raising risk.
• Biden’s administration attempted to eliminate tax breaks for private equity, but it survived in final law.
• Harris’ presidency would likely lead to stronger reporting requirements for private credit lenders.

Biden’s consumer finance measures, Trump’s potential approach, and crypto industry implications.

• Biden’s administration strengthened consumer finance protections through CFPB appointments and rule updates.
• Trump’s administration would roll back these protections, prioritizing light-touch regulation.
• Trump’s presidency has received too much credit for capital market performance, analysis shows.
• Trump’s administration would be more favorable to the crypto industry, with potential for easier access to capital and a more accommodative regulatory stance.

Trump’s financial policies, contrasting light-touch regulation vs. greater enforcement.

• Trump has expressed interest in crypto, promising to make America a mining powerhouse and stockpile Bitcoin, while also opposing regulations and hinting at using it to fix public debt.
• Trump’s policies for crypto regulation could lead to more access to traditional finance for crypto companies.
• Biden’s administration prioritized enforcement over light touch regulation.

US economic impact, geopolitical risks and dollarization.

• US financial markets have significant global influence, with a downturn directly impacting emerging economies.
• The EIU’s Trump risk index shows that US allies and partners are most exposed to his policy changes due to deep trade, security and cultural ties.
• A Trump presidency could lead to increased de-dollarization attempts over the longer term, with gold prices potentially rising due to safe haven demand.

ESG investing and US financial regulations, with a focus on Trump administration policies.

• ESG investing may face challenges under Trump presidency (e.g. rollback of consumer protections)
• Long-term trend towards ESG investing remains stable despite short-term dips (e.g. economic softness in China, rise of far-right)
• Geopolitical risk in the region makes it difficult to attract investors for the project.

US economic policies, including Basel III implementation and impact on banks, private credit, and national debt.

• Basel III implementation timeline for US and EU is uncertain due to pushback from banks.
• Private credit may be affected by carried interest regulation under Trump and Harris governments.
• Expect higher delinquency ratios during a second Trump administration.

EIU analysts offer industry insight and regional expertise, ensuring you are fully briefed on crucial trends affecting your organization:  eiu_enquiries@eiu.com