In just a week – on November 5 – the US presidential elections will take place, and polls indicate a close race. Investors are analysing the potential impact of the future president on the stock market, specific sectors and companies in the USA, as well as on global markets. Yet, according to the latest eToro Individual Investor Pulse survey, as many as 52% of investors did not change their portfolio structure and do not plan to do so in relation to the election.
Next Tuesday, Americans will not only elect a president, but also a third of the Senate and all 435 members of the House of Representatives. The outcome of these elections will set the direction of American policy for the next two years.
Historical data indicates that the S&P500 index increased during the term of thirteen out of the last fifteen US presidents – since the election of Franklin D. Roosevelt in 1933. Average annual returns ranged from 10% during the Kennedy and Johnson administrations to 17% during Clinton’s term. The exceptions were Nixon (-1%) and George W. Bush (-4%), who were in office during economic crises.
However, the election result can influence market sentiment, and gains or losses may be especially visible in the case of specific companies or sectors. This year, a significant difference between the candidates is tax plans. Republicans aim for tax cuts to stimulate the economy, but Trump also promises a 60% tariff on imports from China, which every American consumer may feel. In contrast, democrats want to raise taxes for the wealthiest to reduce income inequality. Industries such as luxury goods, telecommunications and financial services may experience significant effects – both positive and negative – depending on the winner.
Defence, healthcare and energy can also be deeply affected. If Trump wins, the defence budget is likely to increase, which would benefit companies like GE Aerospace, Lockheed Martin and Palantir. However, if Harris wins, focus may shift towards healthcare, which would favour companies like UnitedHealth, the largest health insurer in the USA.
Differences between the candidates are particularly evident in their approach to energy, with republicans supporting fossil fuels while democrats favour renewable energy. However, the impact on stock prices is less clear. During Trump’s first term, investors turned to companies like Exxon Mobil and Chevron, but after four years of his presidency, the oil sector on the stock exchange shrank by half due to a significant drop in oil prices. When Biden took office, shares related to renewable energy sources were quickly bought up, but over time most ambitious goals proved unprofitable. Additionally, some companies like First Solar could benefit from Trump’s protectionist approach, planning to increase tariffs on the import of competitive products from China to stimulate industrial production in the US.
There are also areas where both parties agree, such as infrastructure and technology. Both Republicans and Democrats agree that infrastructure in the USA needs urgent investment. In the technology sector, the USA aims to maintain its advantage over China. Both parties also have to deal with budgetary issues and rising public debt, which consumes 9% of the US budget, as well as labour shortages.
The world is closely following the US elections, however, most investors remain calm, trusting the stock market’s resilience to political risk. According to the latest eToro Individual Investor Pulse survey, 52% of global investors have not changed their portfolio structure nor do they plan to do so in relation to the US elections, and 14% consider a change only after learning the results. Regardless of the outcome, investors should prepare for potential market fluctuations.
Author: Paweł Majtkowski, eToro market analyst.
Source: https://managerplus.pl/wybory-prezydenckie-w-usa-inwestorzy-spokojniejsi-od-politologow-29808
