What Are the Best Stocks to Buy Before the U.S. Presidential Election?
By Mohit Oberoi, CFASep. 30 2020, Updated 1:22 p.m. ET
The U.S. presidential election is only six weeks away. Stock markets could react to the results given the stark difference between President Trump and Joe Biden's proposed economic policies. How could the presidential election impact the stock markets? What are the best stocks to buy before the election?
How the U.S. presidential election could impact the market
Most analysts project a fall in U.S. stock markets if Biden wins the election. The Democratic candidate intends to increase corporate taxes if he gets elected. He has also proposed increasing the maximum capital gains tax rate. The stock markets have done well during Trump’s presidency because tax cuts help increase corporate earnings.
Also, there's a possibility of a contested election if President Trump loses to Biden. If the election results are contested, it could trigger a crash in the stock markets. While President Trump’s trade rhetoric played a dampener with market sentiments, the administration pursued fiscally accommodative policies and worked towards lower regulations. If Trump wins the election, it could lead to a short spike in markets.
What are good stocks if President Trump wins?
If President Trump wins the election, it could lead to a rally in some sectors that would benefit from his policies. The sectors include steel stocks, for-profit schools and prisons, non-renewable energy stocks, and defense stocks. President Trump imposed a 25 percent tariff on U.S. steel imports. U.S. steel stocks haven't done well during his presidency due to the slowdown in global steel markets. A Trump win in the presidential election could ensure markets that the administration will continue the supportive policies for U.S. steel companies. Stocks like Nucor, U.S. Steel, and Cleveland-Cliffs could rise following a Trump victory.
President Trump has denied climate change concerns on multiple occasions. The administration has been supportive of non-renewable energy like coal, oil, and gas. A Trump victory could propel coal stocks like Arch Coal higher. Also, given President Trump’s focus on the defense sector, companies like Lockheed Martin, Raytheon Technologies, and Northrop Grumman could benefit. Private prison stocks, like the GEO Group, could also rally if President Trump wins the election.
Oracle could also benefit from a Trump victory due to his support. President Trump approved Oracle's bid for TikTok. ByteDance picked Oracle over Microsoft as its partner.
What are good stocks if Joe Biden wins?
Joe Biden’s policies would be positive for the renewable energy sector. Solar stocks like First Solar, Brookfield Renewable, and Enphase Energy could benefit from his policies. Also, Biden likely wouldn't be as tough on China as President Trump. Chinese companies like Alibaba and Tencent could rise following a Biden victory in the presidential election. Also, U.S. companies that have high exposure to China could benefit from Biden’s policies.
Given Biden’s support for telehealth, stocks like Teladoc Health could rise if he gets elected. Teladoc offers virtual healthcare services and could benefit from Biden’s policies on promoting telehealth.
Could some stocks benefit regardless of the election results?
There are some stocks that are good regardless of the election results. The stocks include material stocks like Vulcan Materials. Both of the candidates plan to spend big on infrastructure. Berkshire Hathaway also looks good regardless of the election results.
