As the Biden-Harris administration approaches its conclusion, the stock market has shown a notable rebound, with the S&P 500 climbing nearly 50% after a challenging year in 2022. This rise is largely attributed to the performance of the so-called “Magnificent Seven” stocks—household names that dominate the market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
With the 2024 presidential election on the horizon, many investors are turning their attention to the potential impact a Kamala Harris presidency could have on these stocks. The Vice President has laid out an ambitious economic agenda aimed at creating what she describes as “an opportunity economy.” Among her proposals is an increase in the corporate tax rate from 21% to 28%, which has sparked discussions across various sectors.
Although this planned tax increase may seem steep, it’s worth noting that it would still be lower than the maximum tax rate prior to former President Trump’s significant tax reforms in 2018. Harris also advocates for a substantial hike in the tax rate on corporate share buybacks—aimed at promoting business investment over stock repurchases.
Particularly relevant to investors is her proposal for government investments in sectors critical to the nation’s economic and national security. This includes industries like aerospace, biotechnology, clean energy, semiconductors, and artificial intelligence (AI)—the latter being particularly relevant for many Magnificent Seven companies.
Analyzing the potential effects of these proposals reveals nuances in how each company might be impacted. For instance, the effective tax rates for these industry leaders vary significantly. Alphabet’s effective tax rate stands at 13.9%, while Tesla, interestingly, reported a 50% tax benefit last fiscal year—indicating a complex maneuvering of the tax framework that many of these companies excel in.
Given this information, one might wonder about the potential implications of Harris’s policies on stock buybacks—a strategy that has been a favorite among many of the Magnificent Seven. For instance, Apple has aggressively repurchased shares, spending over $70 billion in just nine months. The proposed tax implications could alter how companies distribute capital, but it’s unlikely these changes would drastically affect their stock price trajectories.
On a positive note, the push for tax credits for AI data centers could significantly benefit cloud service giants like Amazon, Microsoft, and Alphabet, while Nvidia could also gain from its hardware catering to the AI sector.
As the election approaches, the big question for investors is: What’s the best Magnificent Seven stock to buy if Kamala Harris wins? While it might be premature to pinpoint a clear frontrunner, many analysts suggest that Amazon emerges as a strong candidate. With its substantial debt portfolio, the company stands to gain considerably from a lower interest rate environment, which might be fostered under Harris’s proposed economic plan. Lower rates could stimulate both consumer and corporate spending, ultimately benefiting Amazon’s e-commerce platform, advertising revenue, and cloud services.
Despite a modest gain of just 12% during Harris’s tenure as vice president, there’s room for Amazon to soar, especially if rates decline further in the wake of an election win. The ongoing shift towards cloud-based solutions, significantly accelerated by advancements in AI, positions Amazon favorably for future growth.
This moment presents a unique opportunity for savvy investors who may have felt left behind in the current market upswing. By strategizing now and considering well-researched investments in stocks like Amazon, they might just capitalize on what could be the next big wave in financial success.
As market dynamics continue to fluctuate, keeping a close watch on political developments and their potential impacts on the economy is essential for navigating the investment landscape ahead. The battle for control of the White House could be more than a political contest; it could also carry profound implications for the stock market, especially for the companies shaping our technological future.