3 Ways Hillary Clinton’s Proposals Could Directly Impact the Stock Market

Clinton plans to tackle three controversial issues if elected, and it could have a notable impact on your wallet.

Believe it or not folks, we’re nearing the home stretch. After beginning with nearly two dozen prospective presidential candidates from both sides of the political aisle more than a year ago, we’re down to just two major party candidates: longtime businessman Donald Trump on the Republican ticket, and career politician Hillary Clinton on the Democratic ticket. In just over two months, we’ll be headed to the polls to select our 45th president of the United States of America.

How Clinton could impact the stock market

This decision can’t be taken lightly. Whoever assumes the role of Commander-in-Chief will be able to sign into law policies that could directly impact you and your investments. Today, we’ll take a brief look at three ways Hillary Clinton could directly impact the stock market if she were to ascend to the Oval Office.

1. Capital gains tax reform

One of the crown jewels of Hillary Clinton’s tax plan is her call for capital gains tax reforms for the wealthiest Americans — those who currently find themselves in the 39.6% ordinary income-tax bracket. This includes any individual earning more than $415,050, head of household filers earning more than $441,000, and married joint filers making $466,950 or more, as of 2016.

The current capital gains tax structure is pretty easy to understand. If you sell an investment within 365 days or less, you’ll be required to count any capital gains as short-term ordinary income. Investments held for 366 or more days and sold for a gain are treated as long-term capital gains.

Long-term capital gains have just three simplified tax brackets that are based on your ordinary income-tax bracket. If you fall into the 10% or 15% ordinary income bracket, you’ll owe 0% in long-term capital gains taxes. If you’re in the 25%, 28%, 33%, or 35% brackets, you’ll owe 15%. Finally, the highest ordinary income-tax bracket, 39.6%, will owe 20%. Being able to hold an investment for just over a year to pay just 20% in capital gains taxes is a big reason why well-to-do investors have been able to increase their wealth so successfully over time.

Proposed capital gains tax rates on top-bracket investors


Clinton wants to adjust how the wealthiest individuals pay long-term capital gains taxes. As you can see above, Clinton wouldn’t allow long-term capital gains to be taxed at 20% unless the individual in question held the investment for at least six years. In fact, no tax concessions are even offered until an asset has been held for two years. As you’ll note, these long-term capital gains tax rates don’t take into account the additional 3.8% net investment income tax that individuals making more than $200,000, and joint filers above $250,000, would have to pay.

On one hand, the move should generate more revenue for the federal government, because most long-term investment gains are made by the wealthy. Then again, the lengthened time frame that investors would have to wait to claim the lowest tax rate could discourage investment altogether, thereby hindering economic growth.

2. Activist investor reforms

Secondly, Clinton has laid out her intentions to seek potential reforms in the way activist investors behave.

Activist investors are investment firms or hedge funds that take a sizable stake in a target company’s stock in an effort to sway its management team to make changes. These changes could be to seek a merger or buyout, to boost its shareholder yield via dividends or buybacks, or simply to sell assets and cut spending.

The ultimate goal of doing this is for the investment firm or hedge fund to realize a profit on its investment based on the requested changes. Presumably, Joe and Jane Shareholder also get to come along for the ride. Some of the most well-known activists include Carl Icahn, Bill Ackman of Pershing Square, and Daniel Loeb of Third Point.

Businessman Looking At Ticker Board Stock Market Getty

Clinton’s contention is that some activist investors are after the quick buck and are engaging in what she referred to as “quarterly capitalism.” As you might have inferred by her capital gains tax proposal above, she’s attempting to promote a longer-term investing environment, and not one ruled by investment funds that seek a quick pop in the share price of a stock, only to leave Joe and Jane Shareholder hanging.

As noted in The Wall Street Journal last year via data from S&P Global Market Intelligence, S&P 500 companies saw their capital expenditures fall to 29% of operating cash flow in the five years after activist purchases from 42% in the year before those purchases. Meanwhile, share buybacks and dividend payouts increased to 37% of operating cash flow in the first year after a company was approached by activist investors from 22% in the prior year.

The concern here is that cost-cutting and a focus on the short term could impact long-term economic growth. Businesses need to be able to reinvest in themselves, and if CapEx is falling significantly, organic growth could be challenged by activist investors looking just weeks or months into the future.

3. Executive compensation tax reform

Finally, Clinton could have a direct impact on executive compensation if she’s elected as president. Clinton, along with other members of her party, has trumpeted income inequality as a prime campaign target during this election, and beginning with executive compensation appears a logical choice.

Executive compensation can take a number of forms, including a salary, perks, common stock, and options. For some executives, being paid in stock or options is commonplace — and this is where the bulk of their annual pay originates. When a company’s management is paid in stock options, its goals are aligned with those of the company’s shareholders. Clinton believes, however, that far too many executives are using this type of remuneration, along with short-term stock gains, to take their money off the table.

Businessman Putting Money In Jacket Pocket Dividend Getty

Although Clinton hasn’t laid out a specific plan to tackle executive compensation, it appears likely that she would aim to change the tax treatment of executive compensation. Based on Clinton’s push for wealthier investors to hold their assets longer, it’s reasonable to assume that any plans to reform taxation of executive compensation would probably take a similar form.

Furthermore, Clinton wants more transparency from public companies on how executive compensation benefits shareholders. In other words, Clinton wants public companies to explain how higher compensation helps promote better long-term returns.

Anything could happen leading up to the November election, but it’s important for investors to understand the possible ramifications of Clinton’s proposals. Perhaps in the upcoming debates, we’ll be able to add more color to the above commentary.

The $15,834 Social Security bonus you could be missing
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.  Simply click here to discover how to learn more about these strategies. 

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


You May Also Like

NAIOP South Florida Appoints Officers, Executive Board and Board of Directors for 2022

NAIOP South Florida, a Commercial Real Estate Development Association offering advocacy, education and business opportunities to its members, has announced the following officers for the 2022 Board of Directors: President:

Pride Week Festival Begins With Tribute to Pulse Nightclub Survivor

Miami Beach Pride’s week-long festivities will commence with a special tribute to the LGBTQ+ community honoring the victims of the tragic shooting at Pulse Nightclub in Orlando. A ceremonial “flip

Surfside luxury condo sees notable sales

Arte at Surfside is making waves. There’s, of course, the news that Ivanka Trump and Jared Kushner are renting at the 16-resident luxury condominium. And there’s the December penthouse sale

Up in the Air: A Discussion

In a dynamic region where residents are typically on the move, everyone is wondering about the health of the airline industry and the safety of airports and airplanes. Everyone is

Other Posts

South Florida Yachting Legend Passes

Robert “Bob” Roscioli, an icon in the South Florida marine industry, has passed away. Many recognize the name Roscioli from the widely-successful and world-renowned Roscioli Yachting Center, a full service

Four key steps

[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”2/3″][vc_column_text] What a crazy time we are all experiencing. Right now, getting back to basics is most important. It is not and

Pandemic adds to worries about hurricane season

An above-normal 2020 Atlantic hurricane season is expected, according to forecasters with NOAA’s Climate Prediction Center, a division of the National Weather Service. The outlook predicts a 60% chance of

The difference between leading and managing

[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”2/3″][vc_column_text] Leadership and management are often misunderstood as one in the same. They are not. Certainly, a good leader should be able

Drew Limsky

Drew Limsky



Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.