As the US presidential election approaches, investors are wondering how a potential Kamala Harris administration could impact the stock market. Despite a tumultuous 2022, the S&P 500 has rallied nearly 50%, largely driven by the stellar performance of the so-called “Magnificent Seven” stocks. But can this momentum continue under a Harris presidency? And which of these seven stocks is best positioned to thrive?
Harris has outlined an ambitious economic agenda, including a plan to increase the corporate tax rate from 21% to 28%. While this hike may seem significant, it’s still lower than the pre-Trump era maximum rate of 39%. The vice president also proposes to quadruple the tax rate on corporate stock buybacks, aiming to encourage businesses to invest in growth and productivity.
The Magnificent Seven – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla – would theoretically be affected equally by the proposed corporate tax rate increase. However, their diverse effective tax rates, ranging from 9.73% (Amazon) to 18% (Microsoft), suggest that the impact would vary. Apple, with its massive $70.6 billion stock buyback program, might be particularly affected by the increased tax on buybacks.
On the other hand, Harris’ plan to invest in key industries, such as aerospace, artificial intelligence, biotechnology, clean energy, and semiconductors, could benefit several Magnificent Seven members. Amazon, Microsoft, and Alphabet, as leading cloud service providers, might gain from tax credits for AI data centers. Nvidia, with its GPU dominance in AI applications, could also reap benefits. Additionally, Nvidia and Tesla might receive tax credits as semiconductor and automaker beneficiaries, respectively.
While it’s difficult to pinpoint a single winner among the Magnificent Seven, Amazon stands out as a potential beneficiary of Harris’ economic policies. With its substantial debt load, Amazon would likely benefit from lower interest rates, which could also boost consumer and corporate spending. The company’s e-commerce, advertising, and cloud services businesses would thrive in a lower-rate environment.
Regardless of the election outcome, Amazon’s shift towards cloud computing, driven by AI advancements, is poised to continue. Surprisingly, Amazon stock has only risen 12% during Harris’ vice presidency, suggesting potential for greater gains if she becomes president and interest rates decline further.
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