The Impact of the US Election on the US Consumer Sector Author: Investing.com

As the November 2024 election approaches, Citi analysts assessed key themes that could impact the U.S. consumer sector based on the policy proposals of the two main candidates, President Joe Biden and former President Donald Trump.

Citi notes that the first presidential debate, held on June 27, left many questions unanswered. But it believes it is crucial for investors to consider potential policy changes and their impact on consumer goods companies.

Key Election Topics: Citi identified five key topics that could impact U.S. consumer goods companies: changes in corporate taxation, trade policy and tariffs, labor policy and the minimum wage, immigration policy and marijuana legislation.

Democratic proposals: The bank acknowledges that President Joe Biden’s proposals include a potential increase in the federal corporate tax rate after the Tax Cuts and Jobs Act (TCJA) expires in 2025 to prevent tax increases for the middle class and small businesses.

They explain that the increase is intended to fund investments in infrastructure, manufacturing and clean energy. Biden’s policies also focus on targeted risk reduction in China, domestic subsidies, raising the minimum wage and promoting marijuana legalization.

Republican Proposals: The bank says Donald Trump’s proposals include extending the TCJA without raising the 21% corporate tax rate and significantly increasing tariffs on imports from China.

Citi adds that Trump’s policies can be expected to be more restrictive on immigration and labor issues, which could result in an increase in the number of deportations of illegal immigrants.

Sector Implications: Citi says that within the beverages and HPC sector, U.S. companies such as SAM, STZ, KDP, CHD and CLX could be most affected by the corporate tax changes.

They point out that NWL is highly exposed to tariffs on Chinese imports, while STZ is seen as potentially exposed to changes in immigration policy and tariffs on Mexican imports. In the food industry, companies such as CAG, BRBR, SJM, CPB and HRL are seen as having high exposure to changes in tax policy, while CAG, CPB, FRPT and SJM are expected to be susceptible to changes in labor policy.

In retail, EYE, DLTR, ANF, BJ and ULTA are considered to be firms that could be adversely affected by corporate tax hikes, while SHOO, OXM and FIVE are considered at risk of tariff increases. Retail hardlines, including BBY and BOOT, could be severely affected by China tariff risk, Citi added.

Meanwhile, the bank says restaurants could see risks from taxing tips, especially in full-service and fast-casual concepts. Finally, in Leisure, they point to PII and DOO as potentially significantly affected by the tariff changes because of their production reach.

Investors should closely monitor developments as the election approaches, considering how each candidate’s policies could impact the future of the U.S. consumer sector.