Just days ahead of the Nov. 5 presidential election in the U.S., 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 the Republican has dwindled to a single percentage point in the final stretch of the presidential contest, according to a Reuters/Ipsos poll published on Tuesday.
A majority of a dozen analysts that Reuters spoke to expect a Trump return to boost equity markets, with some favoring a split government.
Crypto stocks and small-caps have gained in the lead up to the election.
Trump's pledge to cut corporate taxes and decrease regulations could boost markets in the short-term if he wins, said Bel Air Investment Advisors Chairman Todd Morgan.
On the other hand, Trump has promised to double down on trade tariffs, especially against China, and "rescind all unspent funds" under a signature Biden-Harris climate law that includes hundreds of billions of dollars in subsidies for electric vehicles, solar and other clean energy technologies.
A divided Congress may be the best outcome as it limits what the president can accomplish and spend, according to Brian Klimke, chief market strategist at Cetera Investment Management.
Here's a list of stocks and sectors that could move on the election outcome:
TRUMP TRADE
BANKS: A Trump win or Republican sweep could lift Wall Street banks such as JPMorgan Chase (JPM.N), Bank of America (BAC.N) and Wells Fargo (WFC.N) on 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 viewed as negative for the sector.
M&A beneficiaries include Goldman Sachs (GS.N), Morgan Stanley (MS.N), Lazard (LAZ.N) and Evercore (EVR.N) amid a more lenient approach to antitrust regulation enforcement.
CRYPTO: A more "receptive" regulatory approach to digital assets under a Trump win could benefit crypto stocks, according to TD Cowen analysts who highlighted the likelihood of the former president naming a pro-crypto SEC chair.
MicroStrategy (MSTR.O), Riot Platforms (RIOT.O), MARA Holdings (MARA.O), Hut 8 (HUT.O) and Bit Digital (BTBT.O) climbed between 3.4% and 45% in October.
ENERGY: Morgan Stanley analysts believe a Trump presidency could prioritize reducing the regulatory burden on domestic oil and gas production, while considering the possibility of more restrictive trade policies.
"Trump's support for fossil fuel industries could benefit oil and gas stocks, as he would likely pursue policies that favor domestic energy production," said Daniela Hathorn, senior market analyst at Capital.com.
Trump could leverage authority to rapidly increase production levels, which would benefit exploration companies such as Chevron (CVX.N), Exxon Mobil (XOM.N), and ConocoPhillips (COP.N).
He could also reverse the Biden administration's pause on permitting new LNG export projects, likely benefiting Baker Hughes and Chart Industries (GTLS.N). However, Trump's proposed 60% tariff on imports from China could hit LNG exporters like Cheniere Energy (LNG.N) and New Fortress Energy (NFE.O) in case of any retaliatory actions.
TRUMP-RELATED STOCKS: Trump Media & Technology Group (DJT.O), in which Trump owns a majority stake, software firm Phunware (PHUN.O) and video-sharing platform Rumble (RUM.O) stand to gain further if he wins. Both Phunware and Trump Media & Technology have doubled in October after sluggish performance in recent months.
PRISON OPERATORS: Geo Group (GEO.N) and CoreCivic (CXW.N) may 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: Wells Fargo analysts said the proposed tariff on Chinese imports under a Trump term could hurt demand for parcel carriers FedEx (FDX.N) and United Parcel Service (UPS.N), and forwarder C.H. Robinson Worldwide (CHRW.O), which have substantial exposure to China.
SMALL-CAP STOCKS: U.S.-focused companies could benefit from business incentives and tariffs that favor domestic production. The small-cap Russell 2000 index (.RUT) has risen nearly 9% so far in 2024.
HARRIS BASKET
HOMEBUILDERS: Harris' pledge to build more homes and reduce costs for renters and home buyers largely through tax incentives, coupled with a benign interest-rate environment, could boost homebuilders D.R. Horton (DHI.N), KB Home (KBH.N), Lennar (LEN.N), PulteGroup (PHM.N), Zillow Group (ZG.O) and Toll Brothers (TOL.N).
HEALTHCARE: The sector has been a key focus for the Harris campaign.
She has pledged to cut healthcare costs by implementing caps on prescription drug prices, such as limiting insulin prices to $35. This could weigh on profit margins for pharmaceutical giants such as Eli Lilly (LLY.N), Merck (MRK.N), and Pfizer (PFE.N).
Andrew Wells, CIO of SanJac Alpha, however, expects healthcare insurers such as Humana (HUM.N) and UnitedHealth Group (UNH.N) to likely benefit from expanded coverage under a Harris presidency.
CORPORATE TAXES: Harris' proposal to tax corporations and the wealthy includes a 28% corporate tax rate and that could help the U.S. deficit.
According to Stock Analysis, Microsoft (MSFT.O), Apple (AAPL.O), and Alphabet (GOOGL.O) were the three firms shouldering the highest income taxes over the past 12 months, collectively amounting to $67.73 billion.
"It is highly unlikely to see a blue wave, but if that happens, the market reaction could be temporarily negative due to the prospects of higher corporate tax rates," said Cetera's Klimke.
RENEWABLE STOCKS: Green energy is poised to thrive under Harris, with the potential for increased incentives and supportive policies as well as regulations on big oil firms, according to Capital.com's Hathorn.
Harris will aim to significantly reduce pollution by 2035, aligning with the Paris Agreement — a climate pact Trump has vowed to withdraw.
Major U.S. renewable energy firms such as NextEra Energy (NEE.N) and hydrogen producers including Plug Power and Bloom Energy (BE.N) could also benefit.
