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Green energy and technology are the key industries to watch if Kamala Harris wins the US presidential election, while defence contractors, oil and gas producers and cryptocurrencies will be front of stage if Donald Trump is victorious.
Unlike the UK general election where Labour had such a wide lead in the polls from the start and which made it easy to spot the sectors that could thrive or dive under its leadership, the US election is impossible to call at this stage.
Kamala Harris currently has the lead over Donald Trump in the polls*, yet the opposite stands in the betting market**. This divergence is confusing to investors and many won’t have confidence in how to position portfolios for the new presidential term.
That situation, combined with a lack of detailed policy information in many areas, makes this a guessing game for markets and that’s a dangerous situation to be in. It could lead to heightened market volatility and swings in share prices as we enter the final three weeks of the election campaign.
Winners and losers if Kamala Harris wins
Kamala Harris is a self-proclaimed ‘capitalist’ who wants to drive the US economy, supporting US manufacturing and emerging technologies with tax breaks and incentives.
That’s good on paper, but a plan to push up corporation tax from 21% to 28% doesn’t put her off to a good start with the business world. That could hurt corporate earnings and affect stock valuations, leading to lower share prices should she get into power.
However, Wall Street may prefer her approach to Donald Trump given the former president’s widely unpredictable nature. Continuity of political party could also work in her favour, particularly as she has played a key role in the current administration. The one thing stock markets hate is uncertainty and this could be elevated to the max by the return of Trump to the White House, given past form with him being impulsive and provocative.
Harris potentially comes off worse than Trump when looking at capital gains tax. She wants the rate to be 28% on people earning $1 million or more, which is less than the 39.6% eyed by Joe Biden but there is speculation that Trump might push for either 15% or maintain the rate at its current 20%. A rise in capital gains tax rates could trigger a wave of selling on the stock market if wealthy investors seek to avoid paying higher rates once the new president gets into power. That might be a short-term event rather than the sign of things to come.
Expect more regulation under Harris which could push up the cost of doing business and dampen profit margins but also create a fairer landscape for competition.
Technology sector
Harris is an advocate for technological innovation which should be supportive for big tech firms despite the risk of greater regulation if she becomes president. Companies active in artificial intelligence, cybersecurity and digital infrastructure could be the winners if Harris gets in.
Green energy
Kamala Harris is on a mission to address climate change and environmental challenges in the US and investors might see her winning the election as generating a better backdrop for green companies to thrive. This may include renewable energy operators, semiconductor groups, electric vehicle manufacturers and battery material specialists.
Winners and losers if Donald Trump wins
Trump is going big on the economy and immigration in his campaign. His desire to cut corporation tax from 21% to 15% for companies that make their products in the US will appeal to many business leaders.
His previous term as president is associated with a strong run for the stock market whereas Biden – and therefore Harris by default – is clouded by a period of high inflation and high interest rates. That puts Trump at an advantage in the current election campaign as the cost-of-living crisis has been difficult for the general public and they’re looking for someone to find solutions.
Harris might need to better explain that Biden wasn’t responsible for high inflation – the real cause was global supply chain disruption during the pandemic, followed by Russia’s invasion of Ukraine.
Trump may not be the solution to a high cost of living as his policies are likely to drive up inflation. He wants to impose big tariffs on imported goods (60% from China, up to 20% on the rest of the world) which would significantly push up prices as the extra costs are passed onto the customer.
The big risk to markets from a Trump election victory is a trade war. Heavy tariffs on imported goods stand to upset other countries which have historically profited from selling into the US.
Trump doesn’t like to mince his words and there is a big risk his comments and actions provoke foreign leaders which would be problematic for markets, just like last time he was in the White House when he stoked a trade war with China.
To illustrate this point, he recently upset Taiwan by saying it had taken American semiconductor business and that the country should pay the US for defence. That caused a share price wobble in Taiwan’s TSMC, the world’s largest contract chipmaker and who counts America’s Apple and Nvidia as key customers. Taiwan is a major hub for the global semiconductor industry and a big supplier to the US, so a deterioration in relations between the two countries could cause all kinds of problems to companies and consumers globally.
Defence sector
Trump is expected to strengthen America’s defences which creates more opportunities for defence companies.
Oil and gas
A Trump election victory could also create a tailwind for domestic fossil fuel producers in an effort to fortify America’s energy security.
Cryptocurrencies
The other big winner from Trump returning to the White House might be cryptocurrencies given he has promised to make America ‘the crypto capital of the planet’ and to build a strategic reserve of bitcoin.
In theory, cryptos could see the biggest and most immediate price action if Trump wins. However, it’s interesting that the bitcoin price has been volatile in recent weeks, suggesting that some investors and traders might be waiting for a stronger signal that Trump will win before going all-in on the digital currency.
*Presidential polls: Harris 48.4%, Trump 46%. Source: 538/ABC News, 11 October 2024.
**Betting market: Trump 5/6 (54.5% probability of winning), Harris 6/5 (45.5%). Source: Oddschecker, 11 October 2024.
Written by:
Dan Coatsworth
Editor-in-Chief and Investment Analyst
Dan Coatsworth is AJ Bell's Editor in Chief. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He has a degree in Corporate Communications from Southampton Solent University.
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