Stocks That Will Benefit From Trump / Biden in the White House
With just a few weeks left until the US presidential election, it might be a good time to review your stock portfolio. The outcome of the election on 3 November is likely to have an impact on different industries in the stock market.
So which are the stocks that will benefit from a Trump victory? And what about if Biden is successful? In this article, we have compiled a list of stocks that are likely to benefit from the two potential outcomes of the election.
A Background to the US Election
Before we look at stocks that will benefit from Trump, and which from Biden, let's look at how the electoral process functions in the United States. The election is not a direct vote, but rather, US citizens vote for their representatives in the electoral college, who will then, in turn, endorse a candidate for president. This year, there will be a total of 538 elected representatives and the winner of the presidency will need the endorsement of at least 270 of them.
The Republican candidate, Donald Trump, who is running against Democrat Joe Biden (former vice-president to Barack Obama), is standing for re-election. The presidential elections on 3 November will be accompanied by the election of the members of the House of Representatives and 35 of the 100 members of the Senate.
The next resident of the White House will wield much more power and have more freedom to make future decisions on policy if he controls both houses. Currently, the Democrats hold the majority in the House of Representatives, whereas the Republicans have a majority in the Senate.
A Campaign Marked by Coronavirus
- During campaigning, the presidential candidates have kept their face-to-face events to a minimum
- The promise of a Covid-19 vaccine has become a key message in Trump's campaign
What Do the Polls Tell Us?
With five weeks to go until the election, Joe Biden is leading the polls by 7.1 points, illustrated in the chart below.
Despite the clear lead that Biden has held for weeks, voters will remember only too well what happened in 2016, when Trump defied the polls which had strongly favoured Hillary Clinton. When Trump's victory began to become a reality in 2016, the S&P 500 initially fell by 5% and closed the session with a loss of more than 1%. However, soon after, Wall Street began a bullish rally which has only since ended due to the global outbreak of the coronavirus.
Regardless of the polls, one of the greatest fears for investors is that there will not be a clear winner. Or, even worse, that if Biden wins, Trump will contest the result and it will be the start of a long legal battle like the one in 2000 between George W. Bush and Al Gore.
The Economy Under Trump
What does each candidate propose in order to revive the economy? We will start with Donald Trump's proposals:
- Tax cuts and deregulation, a continuation of policies from his first term in office.
- Trump will most likely continue his policy of imposing tariffs on imports to promote US-based manufacturing and the reduction of the trade deficit.
- The current president still desires to impose more control on immigration, with a proposed "merit-based" system which prioritises migrants with certain skills.
- Trump is also expected to push again for a new health care system that will reduce premiums.
- With regards to energy policy, Trump perseveres with his scepticism of climate change and maintains his commitment to the use of fossil fuels.
The Economy Under Biden
Joe Biden is more focused on social and environmental issues, let's take a look at some of his key economic proposals:
- Unlike Trump, Biden is more committed to raising taxes in order to boost government income in light of the crisis. If elected, it is likely that both corporate and capital gains taxes will rise.
- The reversal of Trump's financial deregulation and new regulations on banking.
- The investment of $2 trillion over four years on renewable energy.
- Although Biden is also tough on China's trade policy, he is not as belligerent as Trump and is likely to reduce tariffs and comply with international standards.
- With social policy, Biden plans to bring forward plans to improve childcare and eldery care and also to fund universal preschool education.
Before we go into detail of the different stocks that will benefit under Trump and which from Biden, we would firstly like to recommend that you spend time educating yourself on trading and investing, in order to help reduce the associated risks. At Admiral Markets, we offer free trading webinars conducted by professional traders three times a week. Click the banner below to register today:
Stocks That Will Benefit From a Trump Victory
Now that we have looked at some of Trump's general policies versus those of Biden, we can make an educated guess about which stocks might benefit from Trump remaining in the White House.
Banking - JP Morgan Chase
When Trump became president in 2016, one of his first actions was to reform the Dodd-Frank Act and relax regulation for small and medium sized businesses. Controls over the larger institutions, however, remained stricter in order to prevent a repetition of the 2008 financial crisis.
Nevertheless, these large companies, such as JP Morgan, did benefit from corporate tax reductions. With Trump's re-election, these companies will be able to continue to count on a lower tax burden.
Below is a long term chart of JP Morgan's share price, showing its evolution over the recent years.
Depicted: Admiral Markets MetaTrader 5 - JP Morgan Chase (#JPM) Monthly Chart. Date Range: 1 February 2013 - 24 September 2020. Captured: 24 September 2020. Past performance is not necessarily an indication of future performance.
As we can see from the chart, the start of Trump's tenure as president (marked by the vertical red line) coincides with a more consistent upward momentum for JP Morgan, which, at the beginning of 2020, was recording historic highs. The coronavirus pandemic and the resulting economic lockdown, in February 2020, caused the share price to plummet to its lowest level since August 2017.
Between April and September 2020, the trend is practically horizontal, at between 90 and 100 dollars. However, volatility which is shown by the Average True Range (ATR) indicator, soared in March and continues to increase as we approach the election.
Energy - Chevron
It is well known that Donald Trump is a climate change sceptic. In fact, as soon as he arrived in the White House, he announced that the US would abandon the Paris Agreement. This departure is still in process, so if Trump wins the election, it is a given that it will become reality.
As for his energy policy, Trump has scrapped almost all of his predecessor Barack Obama's environmental regulations. He has increased limits on greenhouse gas emissions, allowed more oil drilling and relaxed pollution regulations related to mining.
Trump's staunch defence of fossil fuels and traditional energy would benefit companies like Chevron. Let's take a look at a graph of how the oil company's stock has fared over the past five years.
Depicted: Admiral Markets MetaTrader 5 - Chevron (#CVX) Weekly Chart. Date Range: 7 June 2015 - 25 September 2020. Captured: 25 September 2020. Past Performance is not necessarily an indication of future performance.
As demonstrated in the graph, since Trump became president in November 2016, Chevron's shares maintained an upward trend until February 2020, when the coronavirus pandemic broke out. Currently close to the psychological support of $70, perhaps a Trump victory would provide the boost the company needs.
Defence - Lockheed Martin
Last February, before coronavirus became a global pandemic and the markets suffered a bigger shock than the last financial crisis, Donald Trump presented a budget for the fiscal year 2021 (starting in October) which included cuts in social spending and an increase in military spending. Although coronavirus has changed plans for governments all over the world, this project presented by Trump eight months ago may serve as a basis for investors to back defence related companies if Trump wins come 3 November.
One such company could be Lockheed Martin, whose share price, as we see below, has reached historic highs during the Trump administration.
Depicted: Admiral Markets MetaTrader 5 - Lockheed Martin Corp (#LMT) Weekly Chart. Date Range: 15 June 2014 - 25 September 2020. Captured: 25 September 2020. Past performance is not necessarily an indicator of future performance.
Lockheed Martin's share price has risen almost continuously over the last five years, until the coronavirus pandemic. Since the summer of 2020, the stock has experienced some volatility and in September, it is trading at around $380.
Consumption - WalMart
The supermarket giant has performed well, despite the recent pandemic and stiff competition from Amazon. Trump's future policy could benefit Walmart, particularly in the area of labour, as it is unlikely to approve measures such as raising the minimum wage or requiring health and social benefits.
Depicted: Admiral Markets MetaTrader 5 - Wal-Mart (#WMT) Weekly Chart. Date Range: 28 September 2014 - 25 September 2020. Captured: 25 September 2020. Past performance is not necessarily an indicator of future performance.
Pharmaceutical - Eastman Kodak
The pharmaceutical industry could also benefit from another Trump presidency, which has already pledged significant funds for the purchase of coronavirus vaccines. In this case, we have selected Kodak because recently, in the summer of 2020, Trump has reached an agreement with the company for it to develop pharmaceutical products. Based on this agreement, Kodak will receive a $765 million loan to produce generic pharmaceuticals.
This news caused Kodak's weak stock price to shoot up, as we see below:
Depicted: Admiral Markets MetaTrader 5 - Eastman Kodak (KODK) Weekly Chart. Date Range: 21 May 2017 - 25 September 2020. Captured: 25 September 2020. Past performance is not necessarily an indicator of future performance.
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Stocks That Will Benefit From a Biden Victory
As we mentioned earlier, Joe Biden is a candidate who is more focused on social and clean energy policies. Based on this, we have highlighted five companies that could benefit from the Democrat's approach. These are only examples and do not in any way constitute investment advice.
Renewable Energy - Brookfield Renewable
Regardless of the results he gets in Congress and the Senate, which will give Biden more or less chance of gaining approval for his policies, the democrat will most likely allocate more funds to green energy. This would benefit companies such as Brookfield Renewable Partners, a subsidiary of Brookfield Asset Management.
Let's see how this company's stock has performed in recent years:
Depicted: Admiral Markets MetaTrader 5 - Brookfield Renewable (BEP) Weekly Chart. Date Range: 21 May 2017 - 27 September 2020. Captured: 27 September 2020. Past performance is not necessarily an indicator of future performance.
As we can see in the graph, the company remained in a sideways range until the end of 2018. From 2019 onwards, a very pronounced rise began, coinciding with the acquisition of several companies, which allowed Brookfield Renewable to multiply its green assets. The coronavirus pandemic temporarily sank the stock value, but it soon recovered and is now trying to break through the $48 resistance.
Electric Cars - Tesla
Continuing the theme of clean energy, Tesla could also benefit from Biden's policies and its interest in promoting electric cars to make the US a global power in this field. Although Tesla has done very well during Trump's years in power, recently conducting a stock split in order to reduce share price, a Democratic administration could provide the right environment for further success.
Depicted: Admiral Markets MetaTrader 5 - Tesla (TSLA) Weekly Chart. Date Range: 28 January 2018 - 27 September 2020. Captured: 27 September 2020. Past performance is not necessarily an indicator of future performance.
In the above chart, we see how in the last days of September, Tesla suffered a fall in share price. We will have to see how it evolves in the coming weeks, taking into account the increased volatility which usually precedes the presidential election.
Cannabis - Canopy Growth
Legal, publicly traded marijuana companies have lost much of their value in the last two years amidst legal and political disputes that have resulted in a number of confusing US marijuana laws. Companies such as Canopy Growth do not have enough of the Canadian market and have been waiting for years for favourable legislation in the United States. With Donald Trump in the White House they have found no allies for their cause. A Biden victory may change this situation.
Why? Last summer, senator Kamala Harris, Biden's vice presidential nominee, introduced legislation that would allow the marketing of cannabis and the elimination of penalties related to marijuana use. This bill passing will depend not only on who resides in the White House, but also on who holds the majority in the Senate.
Depicted: Admiral Markets MetaTrader 5 - Canopy Growth Corp (CGC) Weekly Chart. Date Range: 31 May 2015 - 27 September 2020. Captured: 27 September 2020. Past performance is not necessarily an indicator of future performance.
Health - UnitedHealth Group
Biden has never promised the approval of Medicare, a health system for all, in its entirety, but he has promised a model that will make private insurance more affordable. Therefore, if Biden is successful in his bid for the White House, health insurers, such as UnitedHealth Group, which also specialises in plans that complement the public system, could get a boost in the stock market.
Depicted: Admiral Markets MetaTrader 5 - UnitedHealth Group Inc (#UNH) Weekly Chart. Date Range: 8 February 2015 - 27 September 2020. Captured: 27 September 2020. Past performance is not necessarily an indicator of future performance.
As we can see from the graph, this company has done very well during the Trump administration and, therefore, could actually be a good option in a stock portfolio regardless of the election outcome.
Real Estate - REITs
REITs (Real Estate Investment Trusts) are companies that own real estate assets, as well as mortgages, and are listed on the stock exchange. These companies have a very favourable tax policy as they are not obliged to pay taxes if they distribute at least 90% of their profits as dividends. During the Trump administration, they became a less attractive investment due to the lowering of corporate taxes.
If Biden wins the election and raises corporate taxes, REITs will again become popular with investors because of their tax advantages. An example of a REIT is the Apple Hospitality REIT, which is listed on the New York Stock Exchange and specialises in hotels and motels.
Depicted: Admiral Markets MetaTrader 5 - Apple Hospitality REIT (#APLE) Weekly Chart. Date Range: 17 May 2015 - 27 September 2020. Captured: 27 September 2020. Past performance is not necessarily an indicator of future performance.
As we can see from the chart, the price of this REIT has been fairly negative in recent years. Perhaps there will be a reversal in fortunes if Biden emerges as the next president of the United States.
There are only a few weeks left until we learn the result of the US presidential election. This election year has been somewhat overshadowed by the events of the Covid-19 pandemic, the global economic downturn it has left in its wake and the recent Black Lives Matter protests sparked by police brutality.
Other recent, notable, events in the lead up to the election include the doubts Donald Trump has sown regarding postal voting and the death of the progressive Supreme Court Justice Ruth Bader Ginsburg, which allows the current president to create a conservative majority in this court.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.