Which companies and sectors will benefit from a Trump or Harris victory?
Investors will remember November 8, 2016, when Donald Trump was elected president of the United States. The S&P 500 index rose 5% the next day, largely due to hopes for major tax cuts and financial deregulation that he had promised. During his presidency, Trump frequently took credit for stock market gains on what was then Twitter, although a direct link was never proven. By the end of his four-year term, the S&P 500 index was up 50% from its starting point. This partly explains why investors are so interested in this year’s battle for the White House between Donald Trump and Kamala Harris.
Which stocks will benefit from a Trump versus Harris victory?
This year, the key difference between the two parties’ potential impact on financial markets appears to lie in their fiscal plans. Republicans aim to cut taxes on consumers and businesses to stimulate the economy, while Democrats aim to sharply raise taxes on the wealthiest Americans to narrow the income gap between rich and poor. Sectors expected to feel the biggest impact—whether a boost from tax cuts or tax increases—include luxury goods, communications, and financial services. Think of companies like Procter & Gamble, Verizon, and JP Morgan.
Other sectors often mentioned in connection with various government policies include defense, health care and energy. If Trump wins, a large defense budget is expected, as was the case during his first term. Suppliers such as GE Aerospace, RTX and Palantir could benefit. With Harris as president, the focus is likely to shift to health care, which could benefit companies such as UnitedHealth, the nation's largest health insurer.
When it comes to energy, the differences are clear: Republicans favour fossil fuels, while Democrats prefer renewable energy. The impact on stock prices is less straightforward. During Trump's first term, investors bet on companies such as Exxon Mobil and Chevron, but within four years, the oil sector's stock market had shrunk by half due to the drastic fall in crude oil prices. When Democrat Joe Biden took office, alternative energy stocks were quickly bought up, but over time, most ambitions proved unprofitable. In addition, a company such as First Solar could benefit from Trump's push for greater industrial production on US soil through a significant increase in import tariffs.
Which stocks will get a boost regardless of who wins?
There are also some commonalities regardless of who wins. Sectors likely to receive support from both parties include infrastructure and technology. Much of America's infrastructure is long overdue for replacement. In the technology sector, both Republicans and Democrats will do everything they can to maintain and expand America's lead over China. But given Elon Musk's active role in Trump's campaign, tech investors may fare even better with a Republican victory. Under Trump, the likelihood of big tech companies like Google breaking up is also lower.
National debt and education: persistent challenges for the 47th president
Whoever wins the election and whatever plans are put forward, one constant is concern about the soaring national debt, which seems to be becoming unmanageable. Neither Trump nor Harris have addressed this issue. On the stock market, the yield on the 10-year US Treasury is moving higher, especially on days when Republicans seem to be gaining ground.
Finally, a critical point for investors is education. Neither party talks much about it, but it is vital for the US in the escalating trade war with China. There is already a shortage of skilled workers in high technology, which threatens to hamper industrial producers such as Boeing and Intel. Even Taiwanese company TSMC, which is building $65 billion worth of chip factories in Arizona, has expressed concerns about it. It is not out of the question that this issue will be on the investment agenda after the presidential election.
On November 5, Americans will go to the polls. Given the uncertainty surrounding the outcome, investors would be wise to prepare for further volatility in stock prices.
