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Stocks rose in the days after the Nov. 3 election as Joe Biden’s lead strengthened, along with the possibility of a Republican Senate, a result that would meet some of the best scenarios on Wall Street.
That’s because a Biden victory with a divided government could lead to increased fiscal stimulus while easing investor concerns about higher taxes and much stricter regulation.
“The election was obviously a big cloud over the market, and it is breaking,” Ally Invest chief investment strategy officer Lindsey Bell wrote in a note. While underlying economic and earnings trends coupled with Federal Reserve policies have been supporting optimism, the potential for a divided Congress is “breathing a sigh of relief.”
To be sure, Bell warned that risks, including uncertainty over more pandemic aid, the impact of rising coronavirus cases on economic data, and the possible loss of election results amid legal battles could mean more market volatility in the future.
These are the sectors that were moving in the wake of the elections (all share price movements correspond to this week’s performance):
Technology, Electric Vehicles
Tech stocks rallied on expectations that Biden will not be able to implement key progressive goals, such as antitrust reforms. But that “does not mean that his administration will not take aggressive executive action to curb big tech firms like Google, Facebook, Amazon and Apple,” Beacon Policy Advisors said in a note.
The Philadelphia Semiconductor Index rose more than 12% this week, its biggest gain since March. The industry has high exposure to China, both in its revenue footprint and its supply chain, with some betting that the Biden administration will ease some trade tensions.
Electric vehicle companies made strong gains this week on expectations of a Biden presidency: Shares of Tesla Inc., Nio Inc. and Nikola Corp. all jumped.
Biden’s $ 2 trillion plan to achieve a carbon-free energy sector by 2035 had sent manufacturers of electric vehicles, solar panels and other clean energy companies skyrocketing even earlier this week.
Banks, brokers, exchanges
Analysts at Goldman Sachs Group Inc. forecast that financial services companies will benefit from better capital markets and more mergers and acquisitions, along with the decreasing likelihood of tighter regulation and higher taxes. Alternative asset managers are well positioned, having lagged behind amid investor concerns about taxes, rules and a steeper yield curve, analysts said. The company’s top picks include Morgan Stanley, KKR & Co., and Blackstone Group Inc.
“Even if Biden wins, we believe the chances of sweeping regulatory changes have been reduced,” wrote Brian Gardner of Stifel. “Progressives have had their wings clipped and a Republican Senate could be a brake on overly progressive nominees.”
The brokers looked like winners, as other analysts recommended Goldman and Morgan Stanley as they can benefit from high business volatility and are more insulated from credit and interest rate pressures than other banks. Stock exchanges rose as government debt sales and election-related volatility pointed to an increase in trading volume.
Health care
S&P 500 health stocks rose to a record Thursday and the industry benchmark closed at a new one on Friday. A bipartisan split promises little change on key threats to industry earnings, such as restrictions on prescription drug prices or Obamacare reform.
Shares of health insurers such as UnitedHealth Group Inc. and Humana Inc. reached new heights on Wednesday, although the advance waned in the last two trading days.
Cannabis, Prisons, Weapons
Cannabis stocks extended the gains to a second day when Biden appeared on the cusp of victory. CIBC said investors expect “significant reform” and that “it is times like these that are optimal for owning cannabis stocks as valuations can expand significantly.”
Marijuana stocks had rebounded Thursday, reversing the previous day’s decline, amid renewed optimism about lifting restrictions on marijuana sales in five states this week.
Private prisons fell with CoreCivic Inc. and Geo Group Inc. falling along with rising prospects for Biden. Democrats have long targeted private prison operators.
Arms stocks were mixed. Sturm Ruger & Co. and Smith & Wesson Brands Inc. rallied after the declines, while Vista Outdoor Inc. gained after posting better-than-expected earnings. The vote passed peacefully, while the chances of post-election riots seemed low, diminishing the urgency of consumers for more guns.
Crypto, Gold
Bitcoin extended recent gains on Friday, continuing its march towards $ 16,000 after joining a slew of assets from oil to Asian stocks that rallied in the wake of the US election.
Some see a Biden presidency as problematic for cryptocurrencies, as the Trump administration has been pushing “a more palatable regulatory stance toward digital currencies and initial coin offerings,” according to Cowen analyst Jaret Seiberg. A Biden White House would likely be more concerned with protecting consumers and investors than focusing on opportunities for digital currencies, he said.
Precious metal miners rose after gold broke through “psychological levels” of $ 1,920 an ounce on Thursday and the US dollar fell. Meanwhile, the lithium market would likely benefit from a Biden win, according to the largest producer of the key ingredient in electric vehicle batteries.
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