As citizens cast their votes for a new president, investors are assessing the potential reactions of stock markets, as polls and betting platforms indicate a closely contested race between Vice President Kamala Harris and former President Donald Trump.
Harris’ advantage over the Republican candidate has shrunk to just one percentage point in the closing phase of the election race, as reported by a Reuters/Ipsos poll released on Tuesday.
Most of the twelve analysts interviewed by Reuters anticipate that a Trump victory could elevate equity markets, with some supporting the idea of a divided government.
Stocks in the cryptocurrency sector and small-cap companies have seen an uptick leading up to the election.
Todd Morgan, Chairman of Bel Air Investment Advisors, mentioned that Trump’s commitment to lower corporate taxes and reduce regulations might provide a short-term boost to markets if he secures a win.
Conversely, Trump has vowed to intensify trade tariffs, particularly against China, and aims to “rescind all unspent funds” allocated under a key Biden-Harris climate law, which encompasses hundreds of billions in subsidies for electric vehicles, solar power, and other clean energy initiatives.
According to Brian Klimke, Chief Market Strategist at Cetera Investment Management, a split Congress could yield the most favorable outcome, as it would limit the president’s ability to enact changes and spend.
Here’s a rundown of stocks and sectors that may react to the election results:
TRUMP TRADE
BANKS: If Trump wins or Republicans achieve a sweep, Wall Street banks like JPMorgan Chase, Bank of America, and Wells Fargo may benefit from increased domestic investment, fewer regulations, job growth, and tax reductions, according to analysts at Bank of America.
Nonetheless, fears surrounding a larger trade deficit and tariffs are perceived as detrimental to the sector.
M&A beneficiaries may include Goldman Sachs, Morgan Stanley, Lazard, and Evercore, buoyed by a more relaxed stance on antitrust regulation enforcement.
CRYPTO: A potentially more favorable regulatory environment for digital assets under a Trump administration could positively affect crypto stocks, as noted by TD Cowen analysts who pointed out the possibility of Trump appointing a pro-crypto SEC chair.
Companies like MicroStrategy, Riot Platforms, MARA Holdings, Hut 8, and Bit Digital saw gains ranging from 3.4% to 45% in October.
ENERGY: Analysts at Morgan Stanley believe a Trump presidency might prioritize reducing regulations affecting domestic oil and gas production while contemplating more stringent trade policies.
“Trump’s endorsement of fossil fuel sectors could favor oil and gas stocks, as he is likely to advocate for policies that support domestic energy production,” noted Daniela Hathorn, a senior market analyst at Capital.com.
Trump could utilize his authority to swiftly ramp up production, positively impacting exploration firms such as Chevron, Exxon Mobil, and ConocoPhillips.
He may also reverse the Biden administration’s halt on granting permits for new LNG export projects, potentially benefiting Baker Hughes and Chart Industries. However, Trump’s proposed 60% tariff on imports from China may adversely affect LNG exporters like Cheniere Energy and New Fortress Energy amid any retaliatory measures.
TRUMP-RELATED STOCKS: The Trump Media & Technology Group, where Trump holds a majority share, along with software company Phunware and video-sharing platform Rumble, could see further gains if he wins. Both Phunware and Trump Media & Technology have experienced a doubling in value in October after a period of underperformance.
PRISON OPERATORS: Companies like Geo Group and CoreCivic may find opportunities in Trump’s re-election, driven by his promises to crack down on illegal immigration and impose restrictions on legal immigration, boosting demand for detention facilities.
CARRIERS: Analysts from Wells Fargo indicated that the proposed tariffs on Chinese imports during a Trump administration could negatively impact demand for parcel carriers FedEx and United Parcel Service, as well as freight forwarder C.H. Robinson Worldwide, all of which have significant exposure to China.
SMALL-CAP STOCKS: Companies focused on the U.S. market may gain from incentives and tariffs promoting domestic production. The small-cap Russell 2000 index has seen a nearly 9% increase thus far in 2024.
