U.S. 2024 Presidential Election Impact on Stock Markets

By Ankika Biswas, Pranav Kashyap

(Reuters) – Just days ahead of the Nov. 5 presidential election in the U.S., investors are trying to gauge how stock markets will react as polls and betting platforms point to a tight race between Vice President Kamala Harris and former President Donald Trump.

Harris' lead over the Republican has dwindled to a single percentage point in the final stretch of the presidential contest, according to a Reuters/Ipsos poll published on Tuesday.

A majority of a dozen analysts that Reuters spoke to expect a Trump return to boost equity markets, with some favoring a split government.

Crypto stocks and small-caps have gained in the lead-up to the election.

Trump's pledge to cut corporate taxes and decrease regulations could boost markets in the short-term if he wins, said Bel Air Investment Advisors Chairman Todd Morgan.

On the other hand, Trump has promised to double down on trade tariffs, especially against China, and "rescind all unspent funds" under a signature Biden-Harris climate law that includes hundreds of billions of dollars in subsidies for electric vehicles, solar, and other clean energy technologies.

A divided Congress may be the best outcome as it limits what the president can accomplish and spend, according to Brian Klimke, chief market strategist at Cetera Investment Management.

Stocks and Sectors That Could Move on the Election Outcome:

TRUMP TRADE

• BANKS: A Trump win or Republican sweep could lift Wall Street banks such as JPMorgan Chase (NYSE:JPM), Bank of America, and Wells Fargo on improved domestic investment, looser regulations, domestic job additions, and tax cuts, Bank of America analysts said.
  However, concerns around a wider trade deficit and tariffs are viewed as negative for the sector.

• M&A: Beneficiaries include Goldman Sachs, Morgan Stanley, Lazard (NYSE:LAZ), and Evercore amid a more lenient approach to antitrust regulation enforcement.

• CRYPTO: A more "receptive" regulatory approach to digital assets under a Trump win could benefit crypto stocks, according to TD Cowen analysts who highlighted the likelihood of the former president naming a pro-crypto SEC chair.
  MicroStrategy, Riot Platforms (NASDAQ:RIOT), MARA Holdings, Hut 8, and Bit Digital climbed between 3.4% and 45% in October.

• ENERGY: Morgan Stanley analysts believe a Trump presidency could prioritize reducing the regulatory burden on domestic oil and gas production.
  Trump's support for fossil fuel industries could benefit oil and gas stocks, as he would likely pursue policies that favor domestic energy production.

• TRUMP-RELATED STOCKS: Trump Media & Technology Group, software firm Phunware, and video-sharing platform Rumble could gain further if he wins.
  Both Phunware and Trump Media & Technology have doubled in October after sluggish performance in recent months.

• PRISON OPERATORS: Geo Group (NYSE:GEO) and CoreCivic (NYSE:CXW) may benefit from Trump's re-election due to a crackdown on illegal immigration.

• CARRIERS: Wells Fargo analysts noted that proposed tariffs on Chinese imports could hurt demand for parcel carriers like FedEx (NYSE:FDX) and United Parcel Service (NYSE:UPS).

• SMALL-CAP STOCKS: U.S.-focused companies could benefit from business incentives and tariffs favoring domestic production. The small-cap Russell 2000 index has risen nearly 9% so far in 2024.

HARRIS BASKET

• HOMEBUILDERS: Harris' pledge to build more homes and reduce costs for renters and home buyers could boost homebuilders like D.R. Horton, KB Home (NYSE:KBH), and Lennar (NYSE:LEN).

• HEALTHCARE: The sector has been a key focus for the Harris campaign.
  Proposed caps on prescription drug prices could weigh on profits for pharmaceutical giants.

• CORPORATE TAXES: Harris' proposal includes a 28% corporate tax rate that could help the U.S. deficit.

• RENEWABLE STOCKS: Green energy could thrive under Harris, aligning with a commitment to significantly reduce pollution by 2035, benefiting companies like NextEra Energy (NYSE:NEE).

Overall, the election results could have significant ramifications for multiple sectors in the stock market, depending on whether Trump or Harris takes the presidency.