That’s the message from Wall Street pros as investors brace for a close 2024 presidential election.
So far this year, the S&P 500 (^GSPC) is up 20%, making 2024 the best election year through October since 1936. But that outperformance could be in jeopardy, at least in the short term, because the index is too close at the elections. The call race is expected to largely lead to market volatility.
Market Predictions Polymarket currently shows a 59.5% chance that Donald Trump will win the election, which has led to a return of the so-called Trump trade. Treasury bonds fell and gold rose again last week as investors bet that Trump’s proposed policies on tariffs and tax cuts could prove inflationary.
“The key for the markets will be certainty about the outcome, from which we can understand the economic impact and evaluate the implications for the economic growth trend, and assess the winners and losers of the sector,” says Rob Haworth , senior investment strategist at US Bank Wealth Management, told Yahoo Finance.
Given the key themes emerging from Trump and Harris’ respective campaigns, I asked some strategists what a Republican versus Democratic presidency means for business and Wall Street and narrowed that list down to three trade ideas for each scenario.
Financial services are seen as a top sector under a Republican presidency due to expectations of looser regulations and more mergers and acquisitions.
According to a recent note from Fitch Ratings, a July 2021 executive order under the Biden-Harris administration encouraging greater scrutiny of mergers has hampered deal activity — guidelines that are expected to change under Trump.
“While no proposed mergers have been formally rejected since the Directive came into force, approval times have increased significantly and in some cases to the point where deals have become unviable as market conditions changed during the assessment period,” said Christopher Wolfe, head of the company. of North American banks for Fitch Ratings, wrote in a note.
Kurt Reiman, co-leader of UBS Global Wealth Management ElectionWatch, told me that the financial sector stands out as a “major beneficiary” in both a Red sweep scenario (meaning Republicans control the White House, Senate and House of Representatives). control) as a Trump presidency with a divided Congress.
Reiman said a looser regulatory environment could lead to lower costs and a greater ability to return capital to shareholders, as well as a greater likelihood that consolidation in the financial services sector would meet less resistance.
On the other hand, Reiman and his team see Democrats controlling the White House, Senate and House of Representatives as a “worst-case scenario” for financial services, in part because of the likelihood of greater support for the Credit Card Competition Act – a bill that he positions that will usher in new regulations and stricter interpretations of current rules.
Bank of America’s Jason Kupferberg echoed a similar sentiment. In a recent note to clients, Kupferberg and his team wrote that a Democratic move would be a “worst case scenario” for the payments industry for two reasons: an increased likelihood of a tougher stance on the DOJ’s lawsuit against Visa and the potential for new laws. to reduce the competitive position of Visa (V) and Mastercard (MA) in the US.
Expectations of higher spending under a second Trump administration have sent gold prices (GC=F) to record highs. The precious metal closed the week at $2,734.44 per ounce, bringing year-to-date gains to 34%.
And the run may be far from over, according to Eric Diton, president of the Wealth Alliance.
“We simply don’t have a plan as a country to address our $35 trillion debt and growing debt burden…I haven’t heard anything from either candidate about any kind of spending cuts,” Diton told me.
While neither candidate appears to have a plan to address the nation’s rising deficit, a recent analysis from the Committee for a Responsible Federal Budget estimates that Trump’s policies will increase the national debt by $7.5 trillion over the next decade could increase, compared to $3.5 trillion under Harris.
Health insurers could see some relief under a second Trump administration because of the likelihood of greater support for privatized programs like Medicare Advantage — an approach long favored by Republicans.
And that could boost companies like Humana (HUM), UnitedHealth (UNH) and CVS (CVS).
Oppenheimer’s Michael Wiederhorn called Humana the company’s “best idea” for a Republican victory, noting that Medicare Advantage beneficiaries account for 87% of the company’s premium revenue.
“The main ways a Republican regime could support MA include strong rate increases and a favorable regulatory environment,” Wiederhorn said.
This is a crucial election for the electric car industry, and not just because of Trump’s close ties to Tesla (TSLA) CEO Elon Musk. On the contrary, the former president’s promise to reverse the Biden administration’s EV policy on “day one” could have significant consequences.
“This week’s election, and the potential shift in government regulations based on who wins, will have greater implications for the auto industry than any previous election,” iSeeCars analyst Karl Brauer said in a statement.
Earlier this year, RBC’s Tom Narayan told me that Trump’s “erratic” behavior during his first term unsettled the auto industry, and they see his past threats as a potential challenge to their business if he were elected.
On the other hand, Harris has supported the current administration’s efforts to expand access to electric vehicles. She is largely expected to expand the Biden-era tax incentive of $7,500 for new EVs and $4,000 for used EVs — a credit that Guggenheim’s Ron Jewsikow told me is an “important enabler of affordability.” .
Wedbush’s Dan Ives sees a Harris ticket as positive for General Motors (GM), Ford (F), Stellantis (STLA) and the broader EV industry, including Tesla.
Harris’ pledge to support the housing market and make housing affordability a centerpiece of her economic agenda is a bullish sign for homebuilders, according to Oppenheimer.
The team, led by analyst Tyler Batory, sees Harris’ plan to build three million new homes and improve housing affordability as a key catalyst for the sector. The team named DR Horton (DHI) as a top housing development, arguing that the stock is “uniquely positioned” given its focus on entry-level housing.
“The company’s lower ASP (prices) should benefit from increased demand for a tax credit, and its size should allow for further ramp-up of domestic production,” Batory wrote.
In the company’s third-quarter earnings call, DR Horton CEO Paul Romanowski warned that affordability and election uncertainty had left “some near-term buyers on the sidelines,” sending ripples through the sector . the week, bringing the one-month loss to -8%.
More social support under the Harris administration will boost low-cost retailers, according to Evercore’s Michael Binetti.
“A blue sweep would likely benefit the lowest-income consumers and within our industry, Burlington Stores has the lowest-income demographics and a greater margin opportunity than Ross Stores,” Binetti wrote.
Off-price retailers have outperformed this year as consumers hunt for value amid persistent inflation. Burlington Stores (BURL) posted better-than-expected profits and raised its guidance during its most recent quarterly report, while Ross Stores’ (ROST) value offering helped boost sales 7%. Burlington shares are up 100% in the past year, while Ross is up 21%.
Seana Smith is an anchor at Yahoo Finance. Follow Smit on Twitter @SeanaNSsmith. Tips about deals, mergers, activist situations or something else? Email seanasmith@yahooinc.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
