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NEW YORK: Tuesday’s presidential election between President Donald Trump and former Vice President Joe Biden could have dramatic effects on various stocks and sectors, and investors have spent months trying to identify potential winners and losers.
A group of stocks that benefited from Biden’s Democratic policies have surpassed those that benefited from Republican Trump. During a two-month period ending Wednesday, a “Biden basket” of stocks created by JPMorgan’s head of equity strategy Dubravko Lakos gained 4.5% versus a 16% drop for a “Trump basket.”
Here’s a look at the stocks that might be a better fit in a Biden or Trump portfolio:
BIDEN BASKET
ALTERNATIVE ENERGY: A strong “green energy” push expected under the Biden administration would support alternative energy actions. Green energy stocks have already skyrocketed in anticipation of Biden and the Democrats doing well on Tuesday. The Invesco Solar ETF was up about 40% from roughly mid-September to mid-October, but has been withdrawn more recently.
ETFs to Watch Out For: Invesco Solar ETF, iShares Global Clean Energy ETF
INFRASTRUCTURE: A Democratic sweep “would likely mean a large-scale infrastructure bill that should come to the forefront to jumpstart the US economy,” Deutsche Bank International Private Bank said in a recent report.
JP Morgan includes Vulcan Materials, Jacobs Engineering Group and Caterpillar among the infrastructure stocks in its “Biden basket.”
ETF to watch: iShares US Infrastructure ETF, SPDR S&P Kensho Intelligent Structures ETF, Global X US Infrastructure Development ETF
FISCAL BUMP: Analysts see a Democratic sweep as the surest path to a massive coronavirus aid package to help stimulate the economy. Such a package could especially benefit small-cap stocks and ultimately fuel a long-awaited turnover in value stocks.
ETFs to Watch Out For: iShares Core S&P Small-Cap ETF, iShares Russell 1000 Value ETF
TARIFF TENSIONS: The Biden administration is expected to reduce tensions in the tariff war between the United States and China.
“Better trade would benefit exports, which would benefit many American materials companies, including grain and agricultural exporters,” Columbia Threadneedle Investments said in a recent presentation.
ETFs to Watch Out For: iShares China Large Cap ETF
MARIJUANA: Shares of major U.S.-listed cannabis producers spiked after the vice presidential debate, when Biden’s running mate Kamala Harris said marijuana would be decriminalized at the federal level under the Biden administration. That perspective has driven the sector’s actions.
ETFs to Watch Out For: ETFMG Alternative Harvest ETF
Chart: Trump vs. Biden Stock Baskets – https://fingfx.thomsonreuters.com/gfx/mkt/jbyprxamgpe/Pastedper cent20imageper cent201604092623457.png
TRUMP TRADE
BANKS: Along with higher corporate taxes, banks could face concerns about more regulations under Biden’s administration. Banks in a second Trump term, “could see additional tailwinds due to continued ‘light touch’ in regulation and a push to cut taxes,” Ameriprise Financial said in a report.
JP Morgan includes Bank of America, Wells Fargo and Citigroup in its “Trump basket” of stocks.
If Biden wins, analysts see a ray of light for banks because they could benefit from a sizeable stimulus package and potentially higher bond yields.
ETFs to Watch Out For: SPDR S&P Bank ETF, Invesco KBW Bank ETF
FOSSIL FUEL: A Trump victory “could lead to a friendlier fiscal and regulatory environment for the traditional energy industry,” Allianz Global Investors said in a recent report.
While Biden has made green energy a key point on his agenda, Columbia Threadneedle Investments said that “a ban on new leases or new permits on federal land for energy exploration would be a significant challenge for traditional oil and gas companies. of the United States “.
ETFs to Watch Out For: SPDR S&P Oil & Gas Exploration and Production ETF
BIG TECH: Both sides are expected to continue to put regulatory pressure on tech companies, but Deutsche Bank International Private Bank says the sector was “one of the biggest benefactors” of Trump’s tax reform and “is also likely to benefit. of a softer stance on regulation and antitrust policies. “
According to Allianz, Democrats are more likely to seek changes in ‘Big Tech,’ including breaks and additional regulations. “
ETF to Watch: Invesco QQQ ETF, Technology Select Sector SPDR Fund
DEFENSE: A second-term Trump administration “would likely continue to benefit the aerospace and defense industry,” Ameriprise said in a recent report, noting that Trump is likely to continue to pursue higher defense spending.
ETF to Watch: iShares US Aerospace & Defense, SPDR S&P Aerospace & Defense ETF
PHARMA AND BIOTECHNOLOGY: While both political parties have spoken out against high prices for prescription drugs, a Biden victory, which in particular is combined with the Democrats’ victory in the Senate, could shake the healthcare sector highly regulated, so there might be some relief if Trump gets him re-elected.
“A Democratic sweep in November could increase pressure on drug makers after the election,” according to Ameriprise.
ETFs to Watch Out For: Health Care Select Sector SPDR Fund, iShares US Pharmaceuticals ETF
(Report by Lewis Krauskopf, additional report by Saqib Iqbal Ahmed; edited by Megan Davies and David Gregorio)
