The US Election And Your Portfolio

The US Election And Your Portfolio

over 3 years ago3 mins

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Two and a half weeks away from the US presidential election, Democratic challenger Joe Biden is polling ahead of incumbent Donald Trump. But which investments will end up losing if he does indeed win?

What does this mean?

Let’s start with stocks. According to research firm TS Lombard, the big US tech firms – like Apple and Facebook – would suffer under a Biden victory as “the status quo is one which protects, rather than regulates or taxes, the tech giants.” And as these giants have driven most of the gains in US stocks this year, that could prove ominous for the S&P 500 as a whole.

Swiss asset manager Vontobel agrees that big tech firms would be losers under Biden – and adds financial and health care stocks to the list too. That’s because Democrats might hit all three sectors with increased regulation or taxes, they argue.

Meanwhile, renewable energy stocks should do well if Biden wins, according to Bank of America and Chantico Global. Although, as the Invesco Solar exchange traded fund (ETF) has already more than doubled this year, trouncing the S&P 500’s 9% gain, such green stocks may not have much further to run.

(Source: Koyfin)
(Source: Koyfin)

And when it comes to older, dirtier forms of energy, you might assume that a Biden win would be bad news. But there’s a surprise here from TS Lombard, who reckon that coal, oil, and gas stocks will suffer no matter who’s in the White House.

“Coal is a dying industry and shale is devouring itself,” they write, recommending that clients sell the Energy Select Sector SPDR ETF. “Green-energy policies are broadly supported across the partisan divide. Traditional energy companies will struggle no matter whether Trump or Biden wins.”

Outside of the US, number crunching from TS Lombard indicates that Chinese stocks might do best if Trump retains the presidency, while the UK market may get a Biden boost.

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Looking at the bigger picture, research firm Leuthold Group thinks that a Biden victory would lead to higher inflation – especially if the Democrats also take the Senate and the House of Representatives, resulting in greater government spending and wider budget deficits. This would push the price of US government bonds lower – especially for longer-term bonds – and could mean that in the stock market “a long-awaited rotation from large-cap growth to small-cap value might finally happen.”

Why should I care?

As always, investors will react to how reality differs from expectations. A Biden victory is currently considered the most likely outcome – with a 65% chance according to betting markets and a 10-point lead in polls.

(Source: Real Clear Politics)
(Source: Real Clear Politics)

“Unless the polls narrow into election day, a Trump victory would be the biggest error in our modern era of mass polling,” Deutsche Bank wrote in a report this week.

(Source: Axios)
(Source: Axios)

So – assuming polls don’t move much before the vote – the markets will probably react more strongly to an unexpected Trump triumph than a baked-in Biden bulls-eye. So look for gains in US tech, financial and healthcare stocks – and losses in green energy companies – should Trump win four more years.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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