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CEOs Don’t Know What to Make of the US Election, Either

Eddy Gifford, wealth advisor at TACTIVE, Tech Space for Active Investing, gives his thoughts on the potential impact of the U.S. election on the markets.

(Bloomberg) -- Company executives can’t stop talking about the US election.

Earnings calls in recent weeks have been filled with talk of uncertainty about the aftermath of Tuesday’s election, which has delayed spending as potential policy changes loom large.

And things are more intense in this presidential election cycle. Mentions of “election” near the word “uncertainty” on S&P 500 companies’ quarterly earnings calls this year are markedly higher than they were before the 2020 election. 

“Welcome to the Mad Hatter’s tea party,” Nicholas Pinchuk, tool maker Snap-On Inc.’s chief executive officer, said on the company’s Oct. 17 third-quarter earnings call. “Nobody knows what actually is going to happen, so you can’t even make a pronouncement.” 

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Much of the C-suite angst is over the risk of additional tariffs, particularly if Republican Donald Trump wins another term. Business leaders say new fees on imported goods could increase costs up and down the supply chain, and force some companies to rethink manufacturing and sourcing. Democratic candidate Kamala Harris’ support for higher corporate tax rates is also a source of concern.

It’s not just companies hitting the pause button until voters decide which party will control the White House and Congress.

A recent survey by research firm Circana found that 16% of US consumers said they would wait until after the election to start their holiday shopping, and 17% said they would spend more or less depending on who won.

Etsy Inc. CEO Josh Silverman said last week that the nonstop political noise is “an incredibly distracting mind-share event.”

House builder D.R. Horton Inc. said it wasn’t just higher interest rates holding back potential home purchasers. “The volatility of rates combined with general uncertainty during the election season is causing some buyers to stay on the sidelines in the near term,” CEO Paul Romanowski told analysts.

Car parts retailer O’Reilly Automotive Inc., mattress-maker Sleep Number Corp. and indoor-cycling specialist Peloton Interactive Inc. also cautioned about election-related sales sluggishness on their latest analyst calls.

Fewer people are traveling around the election, impacting airlines and hotel chains. Park Hotels and Resorts Inc., expects bookings to be down about 13% on election week and another 11% the following week as people stay close to home. 

Bombarded by Campaign Ads

Companies are also finding it harder to get their messages across through the relentless campaign advertising. 

“Media is more expensive,” Jim McCann, CEO of 1-800-Flowers.com, said on his company’s latest call. “The election does have a big, big impact on what we pay for things both digitally and in traditional media.”

The US political future also weighed on the minds of analysts monitoring earnings calls. 

Chris McNally of Evercore asked on the General Motors Co.’s call about future electric vehicle losses, adding: “It’s sort of my way of asking the election question without asking the election question.” 

CEO Mary Barra answered that later by saying GM — which has invested billions of dollars in EVs favored by one candidate and loathed by the other — is prepared to deal with any eventuality.

At least one chief executive is brimming with confidence no matter what the outcome. 

“Both presidential candidates are now courting the crypto voter,” digital exchange Coinbase Global Inc. CEO Brian Armstrong said on his company’s third-quarter earnings call. “No matter what happens in this election, it’s going to be the most pro-crypto Congress ever.” 

--With assistance from Jade Khatib and Esha Dey.

©2024 Bloomberg L.P.