September 2024 / MARKETS & ECONOMY
How the U.S. election could impact the financials sector
Next president will determine whether financial regulators will mount up or stand down
Key Insights
- Financial regulators would likely be more proactive and involved with Kamala Harris as president than in a second Trump administration.
- Policy differences could make a difference in bank mergers as well as the regulation of consumer finance and the nonbank financial system.
- The economy’s health and the outlook for inflation and interest rates are likely to be more important for financials’ performance over the next presidential term.
The outcome of the U.S. presidential election is likely to determine the intensity of the financial regulatory environment.
Developments on this front could have important implications for traditional banks as well as for the insurance, asset management, and credit scoring industries.
Push for stronger regulation would continue with Harris in the White House
Heightened scrutiny, increased intervention, and a push to expand oversight of nonbank financial companies have characterized the Biden-Harris administration’s approach to regulating and supervising the sector.
Notably, financial regulators took a stronger hand even before the failures of Silicon Valley Bank and Signature Bank in March 2023.
This history and Harris’s comments on the campaign trail suggest that financial regulators would likely be more proactive and involved under a Democratic president than in a Republican administration.
A Trump win could ease regulatory pressure on financials
In contrast, deregulation would likely be a key pillar of former President Donald Trump’s domestic agenda if he were to win the presidency.
What could that mean for the financials sector?
A leadership changeover at key federal agencies could bring a lighter touch to financial regulation and supervision.
It would also open the door to halting, reversing, or weakening policies advanced by the Biden administration. Rules that have been proposed but not yet finalized would likely be most at risk.
Where the election outcome could make a difference:
Context is key
The U.S. presidential election is likely to have important implications for the intensity of financial regulation. However, government policy is only part of the equation.
The health of the overarching economy, which influences loan demand and credit risk, and the outlook for inflation and interest rates will exert even greater influence on the financials sector’s performance over the next presidential term.
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Gilad Fortgang is an associate analyst covering Washington and regulatory research in the T. Rowe Price Investment Management U.S. Equity Division.
