How U.S. Presidential Elections Impact the Economy—And What It Means for Commercial Banking Clients

Every four years, the U.S. presidential elections bring significant attention and anticipation, not just for the political landscape but also for the ripple effects they have on the economy. For businesses and commercial banking clients, understanding how elections can impact economic conditions is critical. The outcome of elections can influence everything from interest rates and tax policies to regulatory changes and government spending—all of which directly affect business operations.

Let’s explore how the upcoming election may impact the economy and what these changes might mean for Academy Bank’s commercial banking clients.

1. Economic Uncertainty Leading Up to the Election

In the months leading up to an election, uncertainty often reigns. Businesses, investors, and consumers tend to be cautious as they await the potential changes in fiscal policy, taxation, and regulation that could follow the election. This uncertainty can make it difficult for businesses to plan for the future.

For commercial banking clients, this often means slowing down on capital investments, expansion plans, or hiring initiatives. Companies may hold off on applying for loans or financing major projects until the election results are clear. Academy Bank helps clients navigate this uncertainty by offering flexible financial solutions, such as short-term loans or adjustable lines of credit that allow businesses to adapt to changing economic conditions.

2. How do Potential Changes in Fiscal Policy and Taxation Impact Businesses?

Election outcomes can lead to major shifts in fiscal policy, which directly affect businesses’ bottom lines. For example, changes to corporate tax rates, depreciation rules, or deductions can alter a company’s profitability and, in turn, its financial needs.

If a new administration lowers corporate taxes, businesses may see higher profits, increasing their liquidity and prompting a rise in investments or hiring. On the other hand, if corporate tax rates rise, businesses may find themselves tightening budgets and delaying expansion plans. These changes in fiscal policy can significantly impact a company’s demand for commercial banking services, such as business term loans, business lines of credit, or cash management solutions.

With our deep expertise in business and commercial lending needs, Academy Bank can help clients in planning for these changes by helping businesses optimize capital structures and make informed decisions about borrowing and investment.

3. Regulatory Shifts and Compliance Costs for Commercial Banking Clients

One of the key ways U.S. elections affect commercial banking clients is through changes in regulations. A shift in political power can lead to different priorities in terms of regulatory oversight, which may result in either a tightening or loosening of rules affecting industries like banking, energy, healthcare, and manufacturing.

For example, an administration focused on deregulation may reduce compliance burdens for businesses, leading to lower operational costs and freeing up resources for growth. Conversely, a more regulatory-focused administration might increase oversight in areas like environmental impact, worker rights, or financial reporting, potentially raising compliance costs for companies.

For businesses, navigating these changes in regulation can be complex, particularly when it comes to understanding how new rules might affect their financial health. Commercial banks can support clients by offering compliance-related financial products, helping businesses manage the costs of adapting to new regulations, and ensuring that they maintain access to capital in shifting regulatory environments.

4. Interest Rates and Monetary Policy – Commercial and Business Needs

Although the Federal Reserve is independent from the U.S. government, the outcome of an election can influence monetary policy indirectly through fiscal changes or market sentiment.

For commercial banking clients, these changes in interest rates can have a significant impact on their financing costs. Rising interest rates mean higher costs for borrowing, which could affect everything from capital investments to day-to-day operations for businesses reliant on credit. Conversely, lower rates might encourage businesses to take out loans to finance new projects, mergers, or acquisitions.

Banks can help clients prepare for interest rate changes by offering tools like interest rate swaps, fixed-rate loans, and other hedging strategies that protect businesses from the volatility of rising rates. Talk to your Academy Bank commercial or business banker to learn more about your options.

5. Government Spending and Infrastructure Investment

Elections often signal changes in government spending priorities. Whether the focus is on infrastructure, defense, healthcare, or technology, the direction of government investments can create opportunities for certain sectors while placing pressure on others.

For businesses in industries that stand to benefit from government spending—such as construction, manufacturing, or renewable energy—election results can open the door to new growth and expansion opportunities. This often increases the demand for commercial banking products, such as loans, equipment financing, and investment services, as companies ramp up production and hiring to meet new government contracts or projects.

6. Trade Policies and Global Market Impacts on Business

Another area where U.S. elections can have a major economic impact is through changes in trade policy. Elections can lead to new trade agreements, tariffs, or sanctions, which can reshape global supply chains and alter market dynamics for industries heavily reliant on international trade.

For example, a new administration may focus on renegotiating trade deals, which could lead to disruptions or new opportunities for exporters and importers. Higher tariffs or sanctions could increase costs for businesses with international suppliers, while more favorable trade deals might boost exports and open new markets.

For commercial banking clients involved in global trade, these shifts in policy can affect everything from cash flow to profit margins. Banks can assist by offering foreign exchange services, trade financing, and international payment solutions to help businesses manage the complexities of operating in a changing global market.

Preparing for Economic Changes Post-Election

While U.S. elections often create uncertainty, they also bring opportunities for businesses that are well-prepared. The key for commercial banking clients is to remain agile and proactive in responding to potential changes in the economic landscape.

Commercial banks play a crucial role in helping their clients navigate these shifts, providing financial products and services that support businesses through periods of uncertainty. Whether through advisory services, flexible credit options, or risk management tools, banks can be trusted partners in ensuring that businesses are equipped to thrive, no matter the outcome of the election.

At Academy Bank, we recognize that each business has unique needs. Our Business and Commercial Bankers stand ready to help you get to a Done Deal!