Everything is set for the voters of the United States to choose their next leader and occupier of the country. White House on November 5. THE presidential election between Donald Trump and Kamala Harris According to the latest polls, they do not have a clear favorite, although in recent weeks Donald Trump has emerged as the favorite in the polls. Meanwhile, Wall Street is interested in the implications of Democratic or Republican policies if they win. And not all companies listed in the United States will benefit from a favorable context depending on who wins the Oval Office in less than two weeks.
The Democratic and Republican discourses oppose each other on aspects such as taxation, protectionism or social coverage. And it will go away Winners and losers on Wall StreetAccording to experts, this would condition the US debt market and put pressure on the dollar. For example, in the case of stocks, it is expected that the financial sector, technology, telecommunications sector and energy are generally favored by a victory for Donald Trump. According to Kamala Harris’ speech, these include consumer discretionary, renewable energy companies and the healthcare sector, among others. In other words, Wall Street will also depend on the fulfillment of what was promised by the future forty-seventh president of the United States of America.
In a summarizing exercise, Deutsche Bank summarizes that Trump’s victory would bring liberalization of the economy, reduction of taxes and the possible change in policy of the American Federal Reserve (Fed) if the Republican decides to replace Jerome Powell, the current president of the Fed, that is to say greater flexibility for the market and fewer obstacles to investment, in general terms. “With ‘Kamalanomics,’ the U.S. economy would focus on expanding consumption, housing and health care, in addition to a negative fiscal boost by letting some tax cuts expire,” says Deepak, director of invasions for the United States at Deutsche Bank. Puri, regarding the Democratic Party candidacy.
Another aspect that will affect companies listed on Wall Street will be the evolution of the tariff war against China. In principle, Kamala Harris should maintain current trade policies focused on minimal restrictions to maintain a certain competitiveness in the United States. On the other hand, it is taken for granted that Donald Trump will trigger a Trade war 2.0 this will affect businesses mega-capitalized which are affected by the increase in transport costs and retaliation against customs duties on the products or components of the Asian giant.
From Andbank, they go further and tell the investor how to position themselves in the face of a Republican victory. In the event that Donald Trump emerges from the November 5 vote as president of the United States, the investment bank considers that the securities that would benefit would be those exposed to banking regulation, infrastructure, telecommunications and those involved in oil and gas (energy) exploration and production.
On the other hand, they consider that it would be advisable to sell short securities exposed to renewable energies or affected by the 2022 inflation reduction law. It is precisely on these securities that Andbank indicates that it is advisable to open long positions. If victory goes to Kamala Harris, as well as companies that manufacture electric vehicles or are involved in the manufacturing of batteries and other components.
THE 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 sectors filtered by the International Industry Classification Standard (GICS) agreed between S&P Dow Jones and MSCI.
The telecommunications sector and American stocks linked to gas and oil in the S&P 500 would have room for improvement on the stock market of more than 10% (see graph), according to estimates by analysis firms. Donald Trump maintains among his projects that of making the United States the main world producer of crude oil and gas in order to reduce energy costs and facilitate investments focused on oil exploration and exploitation. The Democrat also mentioned in his speeches that he was against providing more funding for broadband expansion, which would give cable companies greater peace of mind in maintaining their competitiveness and market.
Financial and technology companies would have less potential after the increase accumulated during the year and while waiting for Donald Trump to support these sectors with “deregulation, particularly banking”, as Wei Li, BlackRock expert, points out. A less supervision of the banking sector this would imply more lax minimum capital requirements (more liquidity to allocate to loans or investments). Reducing corporate taxes would also give wings to sectors like the financial sector.
Less potential in the Harris camp
In front 9.75% of the average potential that the sectors in advance would have proTrumpthose on Harris’ side get an average potential of 8%. On this side, it is the group of companies linked to renewable energies within the main Wall Street index which has the longest track record, according to Bloomberg. It is, for its part, the one which is progressing the most in this year 2024 marked by the presidential elections in the United States, up more than 36% since January 1. If the Democrat keeps his predecessor Joe Biden’s Inflation Reduction Act (IRA) unchanged, investments in energy and green infrastructure would retain an ally here.
The Harris administration’s proposed increase in child tax credits would increase family spending on products and services beyond the basics (discretionary consumer sector) by increasing the incomes of lower-income families . In addition, the health sector would also benefit from the Democratic victory for increased spending which would benefit biopharmaceutical companies and the pharmaceutical industry. “While the industry could benefit from a Republican government through lower taxes and less regulation, a Democratic victory could be more favorable to health care providers due to the lower percentage of the population without insurance,” he said. commented Deutsche Bank.
The electric vehicle industry would also benefit from Kamala Harris’ victory. Even though there are not many listed companies focused entirely on electric vehicles, the entire chain surrounding the sector would benefit from the $70 billion committed to the IRA and which is about to be distributed to promote the energy transition in the United States. What is anecdotal is that Tesla, owned by Elon Musk, who openly campaigned for Trumpcould be one of the big winners under a Democratic presidency.
There are sectors within variable income whose stock market career It will not depend on the electoral resultaccording to experts. Although they are not sectors immune to market volatility, defense companies, those focused on soft raw materials, agriculture or public services (the utilities) have a low political bias since they generally have regulations that do not vary depending on the political color in power or despite the fact that there is majority control in the chambers by one of the parties.
Even if the polls do not show a clear winner, in recent days they are more in favor of a Republican victory (48.3%), to the point that Kamala Harris has seen her advantage diminish (current average of polls at 47.2 %), according to). the American poll aggregator RealClear Polling. It also affects other assets that depend on the political future of the United States beyond the stock market. Donald Trump has expressed interest in creating a national cryptocurrency reserve. But it is the dollar that will come under the greatest pressure from the Republican side. The trade war with China would lead to an increase in inflation which could mean a further strengthening of the American currency compared to other world currencies.
And the US Federal Reserve could see its monetary policy change due to this rise in inflation and the assault on the institution that Trump advocates, getting rid of Powell and limiting the independence of the person responsible for the price of the dollar. “Political uncertainty can weigh on the dollar, as it did early in Trump’s first term, as the trade conflict with China simmered. The dollar’s safe-haven nature doesn’t help when uncertainty has its roots in the United States itself“, commented Julius Baer economist David A. Meier.
“The Republican program is more inflationary than the Democratic one. Operators are weighing the impact of a victorious Trump given the promised tax cuts, this would ultimately translate into stronger price growth and also higher rates,” commented Cristóbal Dembik, investment advisor at Pictet AM. In this way, anything that involves higher inflation could result in higher rates to control rising prices, putting the U.S. economy closer to a recession or stagnation in growth more abruptly than expected. ‘we announce in the news. walk. And this will also affect the debt market. “Neither of the two candidates has given many guarantees as to the US public debtthat many analysts consider it unsustainable“, explained the investment director of Cazenove Capital (Schroders), Caspar Rock.
All of this can, in turn, further lower the price of US sovereign bonds when the ten-year debt once again reached a profitability of more than 4.2% on the secondary market. “The bond market is starting to integrate the arrival of Trump,” they commented in a note from Banca March.
Most analysis firms believe that market volatility will increase as the date of the presidential elections approaches, November 5. This can already be seen in the debt market, where the risk premium between US ten-year bonds and German bonds (difference between yields) amounted to five-month highs above 190 basis points. From Federated Hermes, they are committed to protecting themselves from variable income fluctuations by choosing small and mid-cap securities in the Wall Street stock market, such as the values of the Russell 2000 index. Likewise, this volatility can also continue after the. elections in the United States given that Wall Street behaves erratically after the elections.
