Pick Your Poison, Trump or Biden?

US presidential elections are slated for November and according to Trump, “the stock market will drop down to nothing” if he isn’t re-elected. Reality check, If a global pandemic couldn’t make this happen, it’s highly unlikely that an election will send the stock markets plummeting to zero.

A July poll by WSJ/NBC shows 51% of respondents voting for Biden and 40% for Trump. General consensus shows a Biden victory would negatively impact stock markets, however, JP Morgan believes a Biden victory would result in a slight positive for the economy.

THE EXPLANATION

Surveys from 6 swing states, states that could vote either Democratic or Republican, swung in favor of Biden. The majority of voters disapprove of Trump’s management of the virus, immigration, economy and American reputation.

Investors are worried Biden’s views on increases in tax rates and regulations could result in a negative impact on stock markets. What a Biden victory could bring:

• Rollback most of Trump’s $2t tax cuts and raising taxes on the wealthiest Americans. Specifically, those making over $400,000.
• Increase corporate tax rate to 28% from 21%. This is expected to lower corporate profits by 12%.
• Regulate industries and limit weapon sales to foreign governments.

On July 9, Biden proposed a $700b+ “Buy American” campaign that will invest over $400b into US-based goods purchased by the government and $300b for research & development in US technology. Other proposals include a plan to spend $2t on clean energy over 4 years.

Analysts are coming to realize that a Biden victory might not be bad for the economy. Benefits include stability in the markets, increased government spending, increased consumer spending, higher minimum wages and lower trade tensions with China.

THE ACTION

How will a Biden victory impact different industries in the stock market?

👎 Military and defense… Biden’s gun control plan to include universal background checks, online gun sales ban and an assault weapons ban will reduce gun sales.

👎 Oil and gas… Increase in regulations on carbon emissions, lowered tax subsidies, and a harder time accessing federal lands for drilling will severely harm the oil & gas sector.

👍 Clean energy (e.g. electric vehicle, solar, wind)… Biden’s positive stance on sustainable energy and a $2t clean energy spending plan will greatly benefit the sector.