Analysis of Industrials Sector Ahead of US Presidential Election

Investing.com – As the US presidential election approaches, Wells Fargo has analyzed the Industrials sector to pinpoint potential winners and at-risk stocks.

Key Election Points

According to Wells Fargo, central issues in the Industrials sector are tax policy, trade/tariffs, and regulation. Analysts noted on Oct. 21 that while a Trump victory may be broadly positive, sub-sector implications vary significantly.

Transport Sector

Transport companies are expected to benefit from a Trump victory, as it may stimulate industrial and broader economic growth. Though trade policies pose risk due to tariffs, the potential rewards of Trump’s policies are perceived to outweigh the risks.

In contrast, a Harris victory would likely maintain the current status quo, which makes companies with unique business models like NS, XPO, and CN more preferable.

Autos Sector

Wells Fargo describes the election as a lose-lose scenario for automakers due to five critical policies: fuel regulations, tariffs, corporation tax, the Inflation Reduction Act (IRA), and auto interest deductions. A Trump win may ease fuel regulations but could lead to cost increases from tariffs. Conversely, a Harris win means sustained economic burdens and rising taxes, offering no relief for the auto industry.

Aerospace & Defence

The election is unlikely to significantly change defense spending trends, according to Wells Fargo. A Trump victory may lead to negative reactions regarding US support for Ukraine, while Harris could impose further regulatory pressures on business jets, akin to Biden's policies. However, bonus depreciation was extended during Trump’s first term.

EEMI Analysis

Overall, the impacts of perceived advantages or disadvantages tied to each election outcome complicate definitive conclusions. A key takeaway is that overcoming the uncertainty of the election could unlock orders and aid short-cycle industrials.

In summary, a Trump victory appears best for early-cycle industries, while a Harris win may favor more thematic or secular areas such as electrical and HVAC industries.