Trump's 'narrow election win' poses big risk for corporate tax cuts: Piper Sandler

Investing.com -- Expectations for President-elect Donald Trump to roll out expansionary fiscal policies and extend U.S. economic exceptionalism have kept stocks on the up and up, but Piper Sandler is skeptical and believes Trump's narrow win and thin Republican margins in Congress will muddy path to pass major legislation including corporate tax cuts.   

"Trump is an unpopular, lame duck president who won a narrow election against a weak opponent and has thin margins in Congress. Investors should not get carried away with what he can move through Congress," analysts at Piper Sandler said.

Trump's comeback victory, while remarkable, represents a "narrow election win along the lines of what George W. Bush and Barack Obama won in their reelection bids," they added.

Bush won 50.7% to John Kerry’s 48.3% and garnered 286 electoral votes in 2004. While Obama won 51.0% to Mitt Romney’s 47.2% in 2012 and scooped up 332 electoral votes.

Trump currently has 50.8% of the vote to Harris’ 47.5% and that lead "will shrink as more votes are counted in California," the analysts said.

The analysts cautioned investors against drawing overly optimistic conclusions from the election results, despite Trump's remarkable comeback victory.

While Republicans are likely to maintain control of the House, the analysts believe it "will be something very close to the slim four-seat margin they have today."

 A slim majority in the House "presents a significant challenge to moving major legislation," they added. "As we have seen during the past two years, a majority of this size is a nightmare for the GOP leadership."

In the upper chamber of Congress, where Republicans have regained control after winning three seats in the election, the analysts stressed that "even with a few votes to spare in the Senate, almost everything will require 60 votes."

"We remain skeptical there will be a major tax cut or an expansionary fiscal policy. A cut in the corporate tax rate is highly unlikely," analysts from Piper Sandler said in a recent note.

Yet, there is a lot that Trump can do without Congress that will likely be welcomed by markets, particularly on the economic front. This includes extending the 2017 tax cuts, implementing his plan to increase tariffs, and reining in illegal immigration."

Source: Investing.com