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Monthly Investment Outlook: Looking past the elections

Wells Fargo Investment Institute - October 2022

Presenter: Jennifer Timmerman, Global Investment Strategy Analyst, Wells Fargo Investment Institute

Transcript:

With the United States mid-terms fast-approaching, the October edition of our “Policy, Politics and Portfolios” report looks past the November 8th election and highlights some emerging developments that may impact markets, the economy, and portfolios after the elections. This year’s lame-duck session could be an active one, particularly if the Democrats and Republicans split control of the two chambers of Congress. Divided government may increase the pressure on congressional leaders to enact some changes during the brief lame-duck session before the new session begins in January. In our view, there are several key issues for that lame-duck session:

  1. First, the Fiscal Year 2023 budget and appropriations bill and tax reform are anticipated to be top priorities, and there is bipartisan support for increasing defense spending.
  2. In addition, Congress has an opportunity to extend a tax credit on business capital expenditure, which is due to expire at the end of this year. We believe the extension may potentially be a favorable development for investors in the Industrial and Information Technology equity sectors.

Moving beyond 2022, an array of legislative issues are creating hope for bipartisan momentum established this year to carry over to the next Congress. At the top of our list of potential legislation to watch, new bills to promote green energy, and especially to protect U.S. technology and build additional domestic chip development and production will be highlights, as the U.S.-China competition in technology intensifies. Efforts to restrict chip exports to China may weigh on some companies’ revenues, but much of the new legislation, as well as new laws enacted in 2022, we feel should promote additional U.S. chip production.

Finally, our report, touches on the state of labor unions — highlighting the implications of increased labor organization in the United States. In the months to come, we see union movements affecting the transportation and retail industries, as well as potentially deepening the coming recession.

For more information, please pick up a copy of our October edition of “Policy, Politics and Portfolios.”