Sectors that would benefit from a Trump win compared to stock market winners with Harris

The stage is set for United States voters to choose their next leader and occupier. White House, November 5.. presidential election between Donald Trump and Kamala Harris They don’t have a clear favorite based on the latest polls, although Donald Trump has emerged as the poll favorite in recent weeks. Meanwhile, Wall Street is considering the consequences of Democratic or Republican policies if they win. And not all US listed companies will have a favorable context depending on who wins the Oval Office in less than two weeks.

The discourse of Democrats and Republicans is directly opposed in areas such as taxation, protectionism or social security. And it will go away Winners and Losers on Wall StreetAccording to experts, this will condition the US debt market and put pressure on the dollar. For example, in the stock industry it is expected that financial sector, technology, telecommunications sector and energy, generally speaking, favor Donald Trump’s victory. Based on Kamala Harris’s speech, this particularly applies to consumers, renewable energy companies and the healthcare sector. That is, Wall Street will also depend on the fulfillment of what the future forty-seventh President of the United States of America promised.

In its synthesis, Deutsche Bank summarizes what a Trump victory will bring economic liberalization, tax reduction and possible changes to US Federal Reserve (Fed) policy if a Republican decides to replace Jerome Powell, the current Fed president. That is, greater market flexibility and fewer barriers to investment in general terms. “With Kamalanomics, the US economy will be focused on expanding consumption, housing and healthcare, in addition to negative fiscal momentum, allowing some tax cuts to expire,” explains Deutsche Bank’s director of US interventions Deepak. Puri on the Democratic nomination.

Another aspect that will impact Wall Street-listed companies will be the development of a tariff war against China. In principle, Kamala Harris is expected to maintain her current trade policy, which focuses on minimum restrictions to maintain a certain level of trade. competitiveness in the USA. On the other hand, it is taken for granted that Donald Trump will deploy Trade War 2.0 this will affect companies mega-capitalized which are affected by rising transport costs and retaliatory measures to tariffs on the Asian giant’s products or components.

At Andbank, they go further and tell investors how to position themselves ahead of a Republican victory. If Donald Trump becomes president of the United States on November 5, the investment bank believes that the securities that are at risk will benefit banking regulation, infrastructure, telecommunications and those involved in oil and gas exploration and production (energy).

On the other hand, they believe that it would be prudent to short securities related to renewable energy or that are covered by the Inflation Relief Act of 2022. It is for these securities that Andbank indicates that it is advisable to open long positions. If Kamala Harris wins, along with companies that make electric vehicles or are involved in the production of batteries and other components.

sectors that would benefit from Republicans offer greater potential, according to market consensus, which reflects Bloomberg at current prices and based on S&P 500 Index sectors filtered by the International Industry Classification Standard (GICS), as agreed upon by S&P Dow Jones and MSCI.

Analyst firms estimate that the telecom sector and U.S. gas and oil stocks in the S&P 500 are poised to improve the stock market by more than 10% (see chart). Donald Trump maintains among his plans to make the United States the world’s leading producer of crude oil and gas in order to reduce energy costs and also ease investments focused on oil exploration and production. The Democrat also mentioned in his remarks that he opposes providing more funding for broadband expansion, which would give cable companies more peace of mind while maintaining their competitiveness and the market.

Financial and technology companies will have less potential after accumulating a year of growth and waiting for Donald Trump to support these sectors with “deregulation, especially in the banking industry,” according to BlackRock expert Wei Li. A less supervision of the banking sector will mean looser minimum capital requirements (more liquidity for lending or investing). A corporate tax cut would also give wings to sectors such as the financial sector.

Less potential in Harris’ camp

Before 9.75% of the average potential that the industries ahead will have pro-Trumpthose on Harris’ side score an average potential of 8%. On this side, the data shows that it is the group of renewable energy companies within the main Wall Street index that has the longest track record. Bloomberg. It, in turn, will grow the most in 2024, marked by the US presidential elections, rising by more than 36% since January 1. If the Democrat keeps predecessor Joe Biden’s Inflation Relief Act (IRA) intact, energy and green infrastructure investments will retain an ally here.

The Harris Administration’s expansion of the child tax credit would increase household spending on products and services beyond the basic (discretionary consumption sector) by increasing the incomes of the most modest families. In addition, the health sector will also see increased spending in a Democratic victory, which will benefit biopharmaceuticals and the pharmaceutical industry. “While the sector could benefit from a Republican government thanks to lower taxes and less regulation, a Democratic victory could be more favorable to health care providers due to a smaller percentage of the population uninsured,” Deutsche Bank commented.

The electric vehicle industry will also benefit if Kamala Harris wins. While there aren’t many companies listed entirely focused on electric vehicles, the entire chain surrounding the sector will benefit from the $70 billion in IRA funding set to be distributed to aid the energy transition in the United States. Anecdotally, Tesla, owned Elon Musk, who openly campaigned for Trumpcould be one of the biggest winners under a Democratic president.

There are variable income sectors whose path in the stock market This will not depend on the election resultsaccording to experts. While defense companies focused on soft commodities, agriculture or public services are not sectors immune to market volatility (i.e. public utilities) have low political bias because their rules generally do not change depending on the ruling political color or despite one party controlling a majority in the chambers.

While polls don’t show a clear winner, in recent days they have been leaning more toward a Republican victory (48.3%), to the point where Kamala Harris’ lead has narrowed (current polling averages 47.2%). American poll aggregator RealClear Polling. It also affects other assets that shape the US political future outside the stock market. Donald Trump has expressed interest in creating a national cryptocurrency reserve. But more pressure from Republicans will be on the dollar. The trade war with China will bring rising inflation which could mean a new strengthening of the US currency against other world currencies.

And the US Federal Reserve may see a change in its monetary policy due to this rise in inflation and the attack on the institution that Trump defends, abandoning Powell and limiting the independence of the man responsible for the price of the dollar. “Political uncertainty could put pressure on the dollar, as happened early in Trump’s first term when a trade dispute with China was brewing. uncertainty has its roots in the United States itself“commented Julius Baer economist David A. Meyer.

“The Republican agenda is more inflationary than the Democratic agenda. Operators weigh influence of victorious Trump given the tax cuts they promised, this will ultimately mean higher price increases as well as higher rates,” commented Pictet AM investment consultant Cristobal Dembic. Thus, anything that implies higher inflation could entail higher rates to control rising prices, which would push the United States economy closer to a recession or stagnant growth that is more extreme than what is ignored in the news for the market. And this will also affect the debt market. “Neither of the two candidates gave many guarantees about US national debtWhat many analysts consider it unstable“, explained the investment director of Cazenove Capital (Schroders) Kaspar Rock.

All this, in turn, can further decline in US sovereign bond prices when ten-year debt again reached yields of over 4.2% on the secondary market. “The bond market is starting to take Trump into account,” they commented in a Banca March note.

Most analyst firms believe market volatility will increase as the November 5 presidential election date approaches. This can already be seen in the debt market, where the risk premium between US 10-year bonds and German bonds (the difference between yields) was five-month highs above 190 basis points. At Federated Hermes, they seek to protect themselves from fluctuations in variable returns by selecting small- and mid-cap securities on the Wall Street stock market, such as the Russell 2000 index. Likewise, this volatility can continue after a decline. elections in the United States, given that Wall Street has been behaving chaotically since the election.