Morgan Stanley
  • Research
  • Oct 14, 2016

When Presidential Politics Comes to the Mall

From minimum wages and tax reform to immigration and healthcare, this year’s U.S. election could have broad consequences for retail bottom lines and consumer confidence.

With November on the horizon, retailers and investors aren’t only prepping for the coming holiday shopping season—they're also keeping a close eye on the U.S. presidential election. That's because the winner's policies could spell changes for everything from wages and consumer spending to healthcare and food and drug regulations.

A recent report by Morgan Stanley Research, "U.S. Election Implications for the Consumer/Retail Sector," outlines the potential impact of a Clinton vs. Trump presidency on a host of industries. Policy proposals from either side could have positive and negative implications, but political realities—namely, divided government—suggest that incremental policy reforms may be more likely than sweeping change.

To that end, the near-term economic impact of this election may boil down to how Americans feel about their new president more than any policy proposal. “Whether American households view either candidate as good or bad for their wallet will ultimately determine the impact of the election on consumer spending," says Paula Campbell Roberts, Morgan Stanley's U.S. Consumer Economist.

The biggest drag on consumer spending may be uncertainty.

What's Up? Maybe Minimum Wage

Both candidates favor an increase in the federal minimum wage. Republican nominee Donald Trump recently announced support for a $10 per hour minimum wage, up from $7.25 today. Meanwhile, Hillary Clinton, the Democratic candidate, advocates for at least $12—an increase that could lift wages for 35 million Americans and boost consumer spending by $20 billion a year, according to Morgan Stanley. Trump's plan could increase spending by $10 billion.

Such gains would most certainly be tempered by rising expenses for many businesses. “We view Clinton's proposed changes to minimum wage laws as potentially being the most disruptive, and could result in materially higher labor costs, with restaurants, hardlines and gaming/lodging being most exposed," says Thomas Allen, the lead analyst on the report.

A wage increase, however, would require Congressional legislation, a likely insurmountable hurdle for Clinton if Republicans maintain control of the House of Representatives. On the other hand, it could be reasonably expected that Clinton would continue her party's track record of stricter Food and Drug Administration regulations that, if elected, she could enact via executive order. Packaged food, tobacco and restaurants could wind up in the crosshairs.


Immigration issues have taken center stage, in part due to Trump's call to build a wall between Mexico and the U.S. and deport millions of undocumented immigrants. While details of his proposal have been limited, his plan includes ramping up immigration enforcement at the employer level by expanding the use of E-Verify, an online platform that employers across the country use to verify their employees' identity.

The additional scrutiny may not bode well for consumer-focused businesses. “Trump has an aggressive position against illegal immigration, which we think would create significant risk to U.S. consumer companies by removing a large number of consumers and workers from the population," Allen says.

In contrast, Clinton's immigration proposals aim to provide undocumented workers with a path to legal status and reduce deportation. The initiatives could give consumer products companies a boost, thanks to a larger labor pool and what essentially amounts to more people spending more money. Once again, though, the odds of a Clinton presidency enacting such proposals with a Republican-controlled Congress are about the same as a Trump administration getting Mexico to fund a $5 billion wall.

Consumers and Uncertainty

Both candidates are pitching additional policies that could affect both consumers and retailers. For example, Clinton has proposed expanding the Affordable Care Act—a.k.a., Obamacare—while Trump favors a full repeal. “While the outcomes of both are more difficult to quantify, numerous examples throughout the consumer sector point to increasing costs to employers as a result of the ACA," Allen notes.

The biggest drag on consumer spending, however, may be uncertainty. The future direction of government policy around issues such as education, healthcare, immigration, taxes and inequality, trade, Social Security and jobs have a direct bearing on whether people decide to save or spend, says Roberts.

A Trump victory along with a Republican Congressional majority would likely mean more legislative changes and the uncertainty that can come with it, which could lead consumers to keep their cash close—at least for the near term. “Given the candidate's positions on global trade and international relations, a Trump presidency could arguably raise both geopolitical and policy uncertainty, which may have implications for consumer spending," Roberts says.

For more Morgan Stanley Research on U.S. retailers and consumers and the 2016 presidential election, ask your Morgan Stanley representative or Financial Advisor for the full report, "U.S. Election Implications for the Consumer/Retail Sector" (Sep 29, 2016). Plus, more Ideas.