Much is at stake for many of the US’ largest companies in the event of a Harris victory, as the huge question looms whether Harris would reappoint Lina Khan as FTC Chair next year. Take the case of Google parent Alphabet. Since its IPO back in 2004, the company’s shares are up some 80 times in price, as it became one of the largest companies in the world, reaching a market value of over USD 2 trillion. Its crown jewel is the control of the online search market and it also controls the Google play store on Android phones, which alone drove USD 45 billion in revenue last year. That clear monopoly power has brought attention from US regulators like Khan. Last week, the US Department of Justice filed a proposal to dismantle the Google monopoly entirely. The company's stock hardly reacted to the news, as the wheels of justice turn extremely slowly in the US, especially for such a complex case and a large company with an army of lawyers. Observers suggest any real crunch time for the company on the issue might not come until 2027. The company could react quite positively, however, should it emerge that Khan will not be reappointed as FTC Chair, a certainty if Trump wins the presidency, and unknown if Harris wins.
The most negative and most positive election outcome scenarios.
The long-term implications are immense for investors should the anti-monopoly forces one day succeed in breaking up or significantly disrupting the business model of Mag 7 stocks like Apple, Alphabet, Meta, Amazon, Microsoft and even Nvidia. But the timelines are very extended, probably years. With only three weeks to go until Election Day, the more immediate question is how the market will treat the election outcome the day after the election and in ensuing weeks. In the past few weeks we’ve covered the two most likely Trump scenarios: Trump 2.0 in which Trump both wins and the Republicans gain control of both houses of Congress, and “Trump gridlock” in which the Republicans only control the White House and Senate. On that latter scenario, the market may be badly underestimating the likelihood of that Trump gridlock outcome, as the Democrats might take control of the House in a close election. Polymarket.com only puts the odds of a Trump gridlock scenario at 13%, versus 38% odds for a Trump 2.0.
Now let’s consider the two Harris scenarios and why they are so extremely different. The most immediately positive scenario for the market could be “Harris gridlock”, in which Harris wins the presidency, but the Democrats lose control of the Senate, even if they do win the House. This scenario is more or less the current market “status quo” that has brought us all time highs in stocks even before the election. While Harris winning means that US companies wouldn’t get fresh corporate tax cuts promised by Trump, it also means that the US economy would avoid Trump’s promised new hefty tariffs. Likewise, the Trump agenda would likely have been more USD positive, at least in the beginning, and a weaker US dollar more likely under Harris is better for global growth. The Harris gridlock scenario is priced in betting markets as the second most likely, currently 26% odds.
On the other hand, a Democratic sweep is the most obviously negative scenario for markets in the days after the election. This is very straightforward: The Democrats have promised to raise corporate taxes from 21% to 28% and the anticipation of higher tax rates would mean that company valuations would need a swift, one-off adjustment lower. Just as the very positive impact of Trump’s chopping the corporate tax rate from as high as 39% to a flat rate of 21% after the 2016 election, this could mean a sell-off of several percent or more in US stocks. A Democratic sweep scenario would be a huge surprise, given the current betting odds of around 18% (and this looks too high – the Senate election map is extremely difficult for the Democrats at this election. It should perhaps be 10% or lower odds).
See you next week!
About the author: John is Saxo’s Chief Macro Strategist, with over twenty-five years’ experience in the financial markets, chiefly as Saxo’s former Head of FX Strategy. He is also an American, having grown up in Houston, TX and has a long-standing passion for following the course of US elections and their place in history since being allowed to stay up late as a young kid to watch the 1980 election results roll in and Ronald Reagan winning the presidency over Jimmy Carter. 
