Good morning! Two notable events occur after markets close today:

1. Nike releases its first quarterly earnings report since announcing Elliott Hill will replace CEO John Donahoe in October

2. Tim Wolz and JD Vance butt heads in the first vice presidential debate

In light of #2, today’s edition breaks down how a Trump and Harris White House could impact the economy.

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Two different economic outlooks

Americans are barreling toward election day but they remain split on whether Donald Trump or Kamala Harris would make a better steward for the US economy, according to recent polls and prediction markets. 

While the Federal Reserve officially kicked off its rate-cutting cycle in September, cumulative price gains continue to weigh on voters.

Inflation spiked to a four-decade high under Joe Biden’s watch in 2022, and shoppers today are still upset about grocery and housing costs. 

Meanwhile, Trump is widely expected to revamp a trade war with China that could cut into US GDP growth and fuel inflation.  

All of these concerns have overshadowed a record-breaking stock market, low unemployment, and broad optimism from Wall Street. 

Economic outlook and tariffs 

A Nomura survey of investors found that the majority of respondents expect a second Trump term to lead to an uptick in inflation and government debt but better economic growth compared to a Harris victory. 

The Trump team, for its part, has argued that a deregulatory administration will in fact boost economic growth. 

Meanwhile, tariffs loom large in a Trump 2.0 scenario.

Nomura respondents, however, do not expect Trump to hike tariffs by as much as he’s claimed during his campaign. 

During his first term, Trump imposed as high as 25% tariffs on over $300 billion of Chinese imports — most of which Biden has kept in place. 

For what it’s worth, Goldman Sachs estimates that fresh tariffs on Chinese imports and autos would fuel a rebound in inflation and slow growth.

In the bank’s view, each percentage point that the effective tariff rate climbs would reduce growth by up to 0.15% should China retaliate. 

Here’s how UBS economists described the impact of tariffs on inflation in a September note: 

“A tariff will not add to prices subsequently, although it may cause behavioral changes (wage demands, profit-led inflation, reduced competition, etc.) that produce second-round inflationary effects.”

Taxes

As Opening Bell Daily covered previously, Trump and Harris diverge on their visions on taxes. The corporate tax rate currently sits at 21%.

Harris wants to raise it to 28%, while Trump wants to lower it to 15%. 

Under Trump’s plan, Goldman Sachs analysts estimate that a lower rate could “arithmetically” boost S&P 500 earnings by about 4%, while Harris’ plan could reduce earnings by roughly the same amount. 

Stocks and betting markets

Talk of a Trump Trade tied to bitcoin and various risk assets have made headlines this summer.

My two cents: Don’t get distracted. 

Much of the chatter is noise — stocks tend to go up no matter which party is in power.

As of Monday, Harris has the slight edge over Trump for election victory odds, according to more than $1 billion worth of wagers on the betting platform Polymarket. 

These odds will likely change in real time during Tuesday’s vice presidential debate between JD Vance and Tim Walz. 

Comments or feedback? Reply directly to this email or let me know on X @philrosenn.

Elsewhere:

🏦 Jerome Powell says more rate cuts are coming. The Fed chief said Monday that the economy remains in solid shape, and his team intends to use their tools to keep it that way: “Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course.” (WSJ)

🚢 Union dockworkers could disrupt the election. Upwards of 15% of the world’s container ships could be caught up in the strike that kicks off October 1. Any prolonged shutdowns for ports in the East and Gulf Coasts could increase Americans’ sense of economic uncertainty. For now, talks over wages and automation issues remain stalled. (Yahoo Finance)

📊 US bonds are making history. Treasury debt is wrapping up its fifth-consecutive monthly gain in a row, even as bond traders pull back the amount of Fed cuts they predict over the next year. This marks the longest streak of monthly gains in 14 years. (Bloomberg)

Rapid-fire:

• The S&P 500 and Dow both hit new records Monday (Yahoo Finance)

• Atlanta Fed President Bostic signaled Monday he’s open to another 50-basis-point rate cut if the labor market shows further weakness (Investing.com)

• Estimated damages from Hurricane Helene have soared above $100 billion (Reuters)

• Super Micro Computer initiated a 10-for-1 stock split on Monday (Barron’s)

• Shares of Stellantis tumbled 13% Monday after the company issued a warning about its North America operations (CNBC)

• US homes are turning over at the lowest rate in 30 years (Business Insider)

Last thing:

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