The 2024 US presidential election might be the closest ever seen, with the latest NBC News poll showing that Donald Trump and Kamala Harris are deadlocked at 49% each among registered voters writes Samy Sriram, market analyst at Stake.
That deadlocked figure is probably all these two candidates have in common.
Harris and Trump have significantly different policy positions across key issues, including tax, trade, regulation and climate change, that are likely to impact some industries more than others. Given the polls showing a toss up, we can expect volatility in the coming days and months as traders calibrate their positions as results flow in.
While it’s probably wise to keep an eye on the long term given current uncertainty, here are some immediate things to look out for.
The Trump trade
If Trump grabs the victory, his ‘drill, baby, drill’ stance could boost domestic fossil fuel production. He’s also pushing for looser environmental regulations, which reduce operating costs for oil and gas giants like Exxon Mobil (NYSE:XOM) ($XOM) and Chevron (NYSE:CVX) ($CVX).
And while Elon Musk has been an extremely vocal Trump supporter, the Republican candidate’s attitude towards green energy initiatives might not go down well for Tesla (NASDAQ:TSLA) ($TSLA). Things could get ugly if the Inflation Reduction Act (IRA) sees a partial repeal, especially concerning EV tax credits.
The Trump administration has also historically favoured deregulation of financial institutions, which is expected to increase potential for bigger profit margins and lower taxes. We can see this in the reaction to US banks JPMorgan Chase (NYSE:JPM) ($JPM) and Wells Fargo (NYSE:WFC) ($WFC) which rallied a little more than expected after their earnings report, but have since receded after a shock Iowa poll which placed Kamala Harris ahead.
Then there’s Trump's ‘America First’ policy, which could protect domestic manufacturers from foreign competition. That’s good news for companies like Boeing (NYSE:BA) ($BA) and Caterpillar (NYSE:CAT) ($CAT). Higher defence spending could also work in favour of Lockheed Martin (NYSE:LMT) ($LMT) and RTX Corporation (formerly Raytheon (NYSE:RTN) Technologies) ($RTX).
On the flip side, Trump has threatened higher tariffs on Chinese imports – firms like Apple (NASDAQ:AAPL) ($AAPL) could face pressure to shift production back to the US If China retaliates with its own set of tariffs, semiconductor stocks like NVIDIA (NASDAQ:NVDA) ($NVDA), Micron Technology (NASDAQ:MU) ($MU) and Intel (NASDAQ:INTC) ($INTC) could bear the brunt of trade tensions.
The Harris trade
Harris’ stance on energy is quite the opposite of her rival: she’s been an advocate for increased federal investments in renewable energy sources such as solar, wind, and green infrastructure. That would mean happy days for firms like NextEra Energy (NYSE:NEE) ($NEE) and First Solar (NASDAQ:FSLR) ($FSLR). Even firms like Rivian ($RIVN) and Tesla have much to gain from Harris’ pro-EV stance.
The outlook for tech is less certain: Harris might be Silicon Valley’s top choice, but she has pushed for regulating big tech and protecting consumers. We’ve talked about the consequences of antitrust scrutiny on firms like Alphabet (NASDAQ:GOOGL) ($GOOG) and Apple – but that could also level the playing field for smaller firms like Applovin ($APP), a company that helps developers monetise their apps.
In the world of healthcare reform, Harris’ policies bode well for health insurers like UnitedHealth (NYSE:UNH) ($UNH) and CVS Health (NYSE:CVS) ($CVS) but pharmaceutical firms will likely feel the pinch given her support of Medicare drug price negotiations.
There’s also real-estate investment trusts (REITs) that could benefit from Harris’ proposed initiatives to support first-time homebuyers and promote affordable housing construction. Since REITs don’t typically pay corporate taxes, they’re also unlikely to be negatively impacted by potential tax changes under Harris.
Finally, cannabis-related stocks could see a boost from a Harris presidency. She supports fully legalising cannabis and a rescheduling from Schedule I to Schedule III would bring down operating costs for the industry in a big way. If that’s the case, sector ETFs like AdvisorShares Pure Cannabis ETF ($YOLO) and the Roundhill Cannabis ETF ($WEED) could be worth watching.
Beyond the volatility
While we can expect volatility in the coming weeks, the uncertainty makes it difficult for investors to act with conviction before the outcome is announced. In these circumstances, remember that over the long term, the S&P500 and NASDAQ 100 have offered strong performance for those that can look beyond the noise.
And this appears to be the approach that most Australian investors are taking. Of the top five most bought ETFs on the US market, three have significant exposure to the US — indicating that most are optimistic about the long-term prospects of this market.