If Trump returns to the White House, where will US inflation, interest rates, and the stock market go?

Most economists predict that if former President Trump returns to office, the United States' inflation, interest rates, and fiscal deficits will be more severe than the policies proposed by Vice President Harris.

According to a survey by The Wall Street Journal, out of 50 economists surveyed, 68% believe that if Trump returns to office, the rate of price increases will be faster than during Harris's term. This proportion has significantly increased compared to 56% in July. Only 12% of economists believe that inflation will be higher if Harris is elected. The remaining economists believe that the policies of both candidates will have little difference in their impact on inflation.

The Democratic Party under Harris proposes tax breaks for newborns and first-time homebuyers; while Trump advocates for tax cuts, increased social security benefits, and the elimination of deductions for car loan interest and state and local taxes.

With just one month left until the 2024 U.S. election, the outlook for the U.S. economy seems increasingly uncertain. Can inflation return to the Federal Reserve's 2% target? What will be the future trend of interest rates? How will the U.S. stock market react? A series of questions are currently weighing on Wall Street's nerves.

If Trump is elected, inflation and deficits will be higher than Harris's

"Both candidates' policies will lead to inflation," said Dan Hamilton, director of the Economic Research and Forecasting Center at Luther College in California.

Unlike the forecasts in July, the Hamilton team now believes that due to Trump's tariff plan, his second term will lead to an acceleration in the rate of price increases.

Hamilton stated: "Since July, we have found that Trump is more opposed to free trade than Harris."

Analysts believe that the tariffs imposed by Trump in his previous term usually pass on higher costs or prices to importers or consumers, and harm industries that rely on imported inputs. This will ultimately lead to price increases, and inflation may resurge.

Philip Marey, senior U.S. strategist at Rabobank, said: "If tariffs really take effect, I think people will face very serious surprises."

Brian Hughes, senior advisor to Trump's campaign team, said: "Trump's policy focus is on promoting economic growth, reducing inflation, encouraging the development of American manufacturing, and protecting American workers from the impact of unfair policies of other countries."

"The sharp increase in government spending in the past two administrations is the main driver of the stock market's rise"

As of last Friday's close, the S&P 500 index has risen by 50% since Biden took office in January 2021.

This is slightly lower than the 53% increase the index achieved during Trump's term.

Raymond James Managing Director and Washington Policy Analyst Ed Mills stated in an interview with financial media MarketWatch:

"My overall view is that regardless of who becomes president, the stock market can perform well. I hope we can change the perception that market performance is determined by who enters the White House."

He mentioned that the significant increase in government spending in the past two administrations has been a major factor driving the stock market rally.

"Since the outbreak of the COVID-19 pandemic, federal government spending approved has been about $8 trillion higher than our usual spending, the situation is the same for both President Trump and President Biden's terms, so for me, that's the reason for the stock market rally."