(WALL STREETS GIVES THE LOWDOWN ON STOCKS/SECTORS UNDER A HARRIS OR TRUMP WIN)
November 6, 2024
Hello everyone.
It’s November 5 - election day. Early numbers point to a Republican win. But it is the swing states that will decide who is the next President of the U.S.
So, we wait.
But, whoever wins, we need to know what stocks/sectors will benefit under each party and why.
It’s 9:45 p.m. Pacific time and the race for the Presidency is very close. The outcome will be consequential for markets on many fronts, including dictating policies that could damage or assist different industries, as well as tax and spending plans that will influence the direction of interest rates and the U.S. dollar.
A Trump win is seen as positive for financials, given a higher likelihood of deregulation for companies in the space. UBS argued that investment banks would outperform from more mergers and acquisitions across the sector. UBS’s top picks for a Trump presidency win include Goldman Sachs, Citigroup, and Citizens Financial.
Goldman Sachs analysts see a GOP sweep resulting in the S&P500 rallying 3%. By way of contrast, the bank sees a Democratic sweep sparking a 3% sell-off for the benchmark. Smaller stocks, the bank believes, are also seen as beneficiaries of a Trump win.
One of the sectors that could see major disruption after the election is energy.
If Harris wins, she is expected to preserve the Inflation Reduction Act, which has boosted a transition into renewable energy. But the IRA passed without GOP support, so if Trump wins, he could repeal it. Stocks to keep an eye on here include: SolarEdge Technologies, Enphase Energy, First Solar, and Invesco Solar ETF (TAN).
Traditional oil and gas names are also likely to benefit under a second Trump presidency.
Investors should keep an eye on giants like Exxon Mobil and Chevron.
And a Trump presidency would be uber bullish for Tesla, which could see the stock jump very quickly towards $300.
But what about retail stocks?
Trump has talked a lot about tariffs. He is proposing 10%-20% tariffs on most imports, and some levies may be as high as 60%+ for China. Target may have a tough time under a harsher tariff regime.
Harris’s policy may mirror the Biden administration.
And small caps. How would they fare?
Under a Trump presidency, they may be a major winner, given the former president’s willingness to roll back regulation and cut tax rates further for companies.
As of Tuesday afternoon, the iShares Russell 2000 ETF (IWM) was up more than 10% for the year.
So, now to crypto. Trump has signaled his support for the industry in his campaign. A Trump presidency would probably see digital currencies such as bitcoin scale to new heights due to a more favourable regulatory regime.
A Harris administration, however, is not seen as favourable for crypto.
Stocks to watch here include Coinbase and the iShares Bitcoin Trust ETF (IBIT), which has rallied 30% over the past three months. And don’t forget Bitcoin and ether, which you can purchase through a crypto exchange.
The U.S. dollar started to rally early in the evening yesterday as early voting started to lean toward the Republicans. Protectionist policies such as tariffs under the Trump administration would boost the dollar. But, some investment banks, such as UBS, think this move is only temporary and believe that investors should use these periods of strength to diversify dollar exposure toward other G10 currencies.
They argue that the dollar is overvalued and has a smaller yield advantage over other currencies, and the US’s significant twin fiscal and current account deficits are likely to weigh on the currency regardless of who takes the Presidency.
It's now just after midnight, and DOW Futures are up over 800 points. Looks like there will be a strong rally in the markets on Wednesday, as Trump is expected to take the Presidency.
Thank you to all those who attended my monthly Zoom meeting yesterday. We had a great discussion after the presentation. Thank you, too, to those who gave me suggestions for future newsletter topics. The recording will be sent out to everyone after it has been edited.
Gold and Silver have retraced after a strong move to the upside, so if you want to scale in or add weight to your precious metal holdings, now is a good time to do so. You could also use LEAPS as an alternative to scaling into stocks, or you could do both.
(GLD), (GOLD), (GDX), (WPM), (SLV), (AGQ)
I would also be looking at scaling into Exxon Mobil (XOM) and Tesla (TSLA). You could also add LEAPS one year out as an alternative or do both.
Cheers
Jacquie
