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Analysis
July 27, 2024
The 2024 Presidential Election is looking close, with recent polls indicating a dead heat between Vice President Kamala Harris and former President Donald Trump. Though there is plenty of time for polls to change, the political uncertainty has coincided with a US stock market sell-off, and jitters amongst US equity traders are rocking the stock market. No one can say for sure how the markets will react to a Trump or Harris win, but there are some stocks more likely to be impacted than others.
Market volatility will concentrate on a few key dates around the election. As well as the general risk-on / risk-off environment, individual stocks in certain industries – defence, finance, and energy – are likely to see a major impact of the 2024 election. These are companies and groups of businesses linked to policy debates during the election, including security, defence spending and procurement, or industrial policy. While the overall market impact of presidential elections is hotly debated, impacts on specific stocks are more obvious.
The Dow Jones Industrial Average (DJIA) is one of the two headline measures of US stock market performance, and it consists of 30 of the most important American businesses. Unlike the S&P500, which includes a broader cross-section of the US economy, the DJIA is highly concentrated in just a few sectors. This can make it more sensitive to policy debates that impact the financial, consumer goods, and pharmaceutical sectors. The DJIA is also unusual in that it is weighted by price, rather than market capitalisation, favouring stocks trading at a higher unit price regardless of the number of shares outstanding. In previous election years, the DJIA has performed strongly following the result, with major rallies in 2016 and 2020, and this pattern may repeat in 2024.
Some market commentators have been talking about Trump stocks – stocks that could perform well if former President Trump stages a comeback and wins the 2024 election. Traders and investors need to remember that polls are now very close, and even if the Republicans win the election there is never a guarantee that stocks will move in the way predicted. That said, some possible rotations in the event of a Trump victory would be into financial and energy stocks, and out of solar energy companies and renewables. These stocks are more likely to benefit from a Harris victory, and they may experience sell-offs if Trump wins.
Bank of America is one of the largest global investment banks. Analysts predict that a Trump administration may be more lenient with rules regarding mergers and acquisitions, potentially providing upside for bank stocks. Bank of America, with its large corporate finance advisory business, could therefore benefit from a Trump victory, since the Republican party have promised to slash general regulation around the financial sector and provide a lighter touch on mergers and acquisitions.
Lockheed Martin is one of the largest companies in the defence and aerospace sector. It is the largest US defence contractor, manufacturing the main fighter aircraft of the US military, alongside two other partners. Lockheed Martin is a constituent stock of the S&P100 index, and it could benefit from a Trump win as the Republican Party has a long track record of making major defence investments. The stock is also considered a highly reliable dividend payer.
NextEra Energy is an American energy company and the world’s largest utilities holding company by market capitalisation. NextEra has a strong focus on renewables and solar energy production, which are responsible for about half of its overall energy production. Continued investment in renewable energy is likely if Democrat Kamala Harris wins the White House, so this stock may benefit from a Harris win, and could potentially experience losses following a Trump victory.
Wells Fargo and Company is a major domestic US bank, focused on the retail banking sector. As one of the largest mass-market banks in the US, Wells Fargo may benefit from less stringent capital requirements if the Republicans win the White House in 2024. Unlike Bank of America or other major investment banks, Wells Fargo’s revenue is derived from the US domestic market, and so experiences a lesser influence of unrelated, external factors or market cycles.
The 2024 election is looking close. Although we can make reasonable predictions about how certain sectors will perform under a Democrat or Republican presidency, the uncertain outcome of the election makes trading off this difficult. Unless polls widen significantly before the election, any market adjustments will take place at the last minute, and results could easily take traders by surprise. When markets reopen on 6 November, the stocks described in this article are likely flashpoints for volatility, and stock or stock CFD traders should take their positions carefully. As always, markets can move in unpredictable ways, and any trading should be backed up with rigorous risk management.
What stocks might benefit from a Trump victory in the 2024 US Presidential election?
No one can say for sure which stocks will perform well after the election. That said, Bank of America and Lockheed Martin could be well-placed to trade strongly following a Trump win. Bank stocks may gain from less stringent financial regulations, while defence contractors such as Lockheed Martin might see increased investment under a Republican administration.
How might the Dow Jones and S&P500 react to election results?
In recent elections, the DJIA has performed strongly following election results, with major rallies observed in 2016 and 2020. The DJIA is concentrated in a few sectors and may be more volatile than the broader S&P500 index, which is more likely to trade on the underlying fundamentals of the US economy.
Which stocks could benefit from a Harris victory?
NextEra Energy, a utility company with a strong focus on renewables and solar energy production, could be among the stocks benefiting from a Kamala Harris win. In general, sectors involved in renewable energy and related technology are likely to benefit from a Democrat administration, which is more likely to invest in green technology.
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