The Impact of the U.S. Presidential Election and Economic Policies on Our Economy

 Hello everyone, today I want to talk about how the U.S. economy and the outcome of the presidential election might impact various industries. While we are dealing with complex economic policies, I will break things down simply so that you can understand the risks and prepare accordingly. In this blog, we will look at how interest rate policies, potential subsidy reductions, and international affairs might affect the economy and industries, accompanied by some straightforward charts.

The Impact of Interest Rate Cuts on the Economy

In the second half of 2024, the U.S. cut interest rates by 50 basis points. This makes it easier for consumers to borrow money, and reduces the burden on companies investing in growth, which could positively impact economic recovery. The expected economic growth rate is 2.6%, suggesting that a major recession could be avoided thanks to the interest rate cut.

Let's take a look at the chart:

As shown in the chart, the interest rate cut is likely to play a positive role in economic growth, though there are still concerns about an economic slowdown. Bloomberg has stated that the Federal Reserve's interest rate cut could stabilize both consumption and the labor market, helping prevent a recession.

Additionally, we can learn from historical economic indicators that productivity boosts played an important role in stabilizing the economy while maintaining low unemployment and low inflation. There have been four key periods since 1900 when low unemployment and low inflation were achieved due to a surge in productivity:

These historical periods show that productivity increases have been critical in fostering economic stability during times of high growth.

Changes in Subsidy Policies and the Impact of the Election

If Trump wins the upcoming U.S. presidential election, it is highly likely that the large-scale subsidy policies of the Biden administration will be reduced or abolished. Particularly, policies like the American Rescue Plan Act and the Inflation Reduction Act may disappear, which could negatively impact industries like electric batteries and semiconductors. On the other hand, even if Harris wins, reducing subsidies seems inevitable due to concerns over fiscal deficits.

New York Times has reported that Trump has criticized these subsidies as “harmful to the U.S. economy” and is considering abolishing them. These changes could have significant impacts on industries that heavily depend on subsidies.

Russia-Ukraine War and International Affairs

The outcome of the presidential election could also significantly affect international affairs. If Trump is elected, he has promised to end the Russia-Ukraine war. Should the war end, it is likely to have a significant impact on Chinese and Indian refiners, who have benefited from lower-priced Russian oil. With the end of the war, these refiners could lose the advantage of cheap oil and face increased costs.

Financial Times has analyzed that the end of the war may negatively impact the bargaining power of Chinese and Indian refiners regarding oil prices.

Conclusion: Early Detection of Economic Risks is Crucial

Depending on the outcome of the presidential election, U.S. economic policies and international affairs could change significantly. Interest rate cuts, changes in subsidy policies, and the possibility of the Russia-Ukraine war ending are all factors that will have a major impact on various industries. Understanding and preparing for these factors in advance is not only important for personal investment but also crucial for companies to survive and grow. Early detection of risks and discussing alternative strategies can make a significant difference in business success.

I hope today’s discussion helps you in your investment and business strategies. Let’s all aim to make smarter choices in anticipation of economic changes!