By Ankika Biswas, Pranav Kashyap
(Reuters) – Just days before the Nov. 5 U.S. presidential election, investors are trying to gauge how stock markets will react as polls and betting platforms point to a tight race between Vice President Kamala Harris and former President Donald Trump.
Harris’ lead over Republicans has shrunk to one percentage point in the final stretch of the presidential election, according to a Reuters/Ipsos poll released on Tuesday.
A majority of the 12 analysts Reuters spoke to expect a Trump return to boost stock markets, with some favoring a split government.
Crypto stocks and small caps have risen ahead of the election.
Trump’s pledge to cut corporate taxes and reduce regulations could boost markets in the short term if he wins, said Todd Morgan, chairman of Bel Air Investment Advisors.
On the other hand, Trump has pledged to double trade tariffs, especially against China, and “revoke any unspent funds” under a signature Biden-Harris climate bill that would cut hundreds of billions of dollars in subsidies for electric vehicles, solar energy and other clean energy technologies.
A divided Congress could be the best outcome because it limits what the president can accomplish and spend, said Brian Klimke, chief market strategist at Cetera Investment Management.
Here is a list of stocks and sectors that could move as a result of the election results:
TRUMP TRADE
BANKS: A Trump or Republican victory could lift Wall Street banks such as JPMorgan Chase, Bank of America and Wells Fargo in terms of improved domestic investment, looser regulations, domestic job additions and tax cuts, Bank of America analysts said.
However, concerns around a wider trade deficit and tariffs are seen as negative for the sector.
M&A beneficiaries include Goldman Sachs, Morgan Stanley, Lazard and Evercore, amid a softer approach to antitrust enforcement.
CRYPTO: A more “receptive” regulatory approach to digital assets under a Trump victory could benefit crypto stocks, according to analysts at TD Cowen who highlighted the likelihood that the former president would appoint a pro-crypto SEC chairman.
MicroStrategy, Riot Platforms, MARA Holdings, Hut 8 and Bit Digital rose between 3.4% and 45% in October.
ENERGY: Morgan Stanley analysts believe a Trump presidency could prioritize reducing regulatory pressure on domestic oil and gas production while considering the possibility of more restrictive trade policies.
“Trump’s support for the fossil fuel industry could benefit oil and gas stocks as he is likely to pursue policies that promote domestic energy production,” said Daniela Hathorn, senior market analyst at Capital.com.
Trump could use his authority to quickly increase production levels, which would benefit exploration companies like Chevron, Exxon Mobil and ConocoPhillips.
He could also reverse the Biden administration’s pause on allowing new LNG export projects, which would likely benefit Baker Hughes and Chart Industries. However, Trump’s proposed 60% tariff on imports from China could hit LNG exporters such as Cheniere Energy and New Fortress Energy in the event of retaliation.
TRUMP-RELATED STOCKS: Trump Media & Technology Group, in which Trump has a majority stake, software company Phunware and video sharing platform Rumble will make even more profits if he wins. Both Phunware and Trump Media & Technology doubled in October after sluggish performance in recent months.
PRISON BUSINESS: Geo Group and CoreCivic could benefit from Trump’s re-election on promises of a crackdown on illegal immigration and restrictions on legal immigration, which could boost demand for detention centers.
CARRIERS: Analysts at Wells Fargo said the proposed tariff on Chinese imports under a Trump term could hurt demand for parcel carriers FedEx and United Parcel Service, and freight forwarder CH Robinson Worldwide, which have significant exposure to China.
SMALL-CAP RECOMMENDATION: U.S.-focused companies could benefit from business incentives and tariffs that promote domestic production. The small-cap Russell 2000 index is up nearly 9% so far in 2024.
HARRIS BASKET
Home Builders: Harris’ promise to build more homes and lower costs for renters and homebuyers, largely through tax incentives, coupled with a favorable interest rate environment, would help homebuilders DR Horton, KB Home, Lennar, PulteGroup, Zillow Group and Toll Brothers could give a boost.
HEALTHCARE: The sector was a key focus for the Harris campaign.
She has promised to lower health care costs by putting caps on prescription drug prices, such as capping insulin prices at $35. This could weigh on the profit margins of pharmaceutical giants like Eli Lilly, Merck and Pfizer.
However, Andrew Wells, CIO of SanJac Alpha, expects that health insurers such as Humana and UnitedHealth Group will likely benefit from expanded coverage under Harris’ presidency.
CORPORATE TAXES: Harris’ proposal to tax corporations and the wealthy includes a 28% corporate tax rate and that could help widen the U.S. budget deficit.
According to Stock Analysis, Microsoft, Apple and Alphabet were the three companies that had to pay the highest income taxes over the past 12 months, with a combined value of $67.73 billion.
“It is very unlikely that there will be a blue wave, but if it does happen, the market reaction could be temporarily negative due to the prospects of higher corporate tax rates,” Cetera’s Klimke said.
RENEWABLE STOCKS: Green energy is poised to thrive under Harris, with the potential for more incentives and supportive policies, as well as regulations for major oil companies, according to Capital.com’s Hathorn.
Harris will aim to significantly reduce pollution by 2035, in line with the Paris Agreement – a climate treaty that Trump has pledged to withdraw from.
Major U.S. renewable energy companies, such as NextEra Energy, and hydrogen producers, including Plug Power and Bloom Energy, could also benefit.
(Reporting by Ankika Biswas and Pranav Kashyap in Bengaluru; Editing by Sweta Singh and Devika Syamnath)
