An anticipated Biden-Trump rematch is at the forefront of investors’ minds, with former President Donald Trump getting closer to securing the GOP nomination. Investors are considering the history which indicates that a strong pre-election year tends to carry over into the following year. According to analysis from Ryan Detrick of Carson Group, the S&P 500 has recorded gains in every election year after a pre-election year with gains of 20% or more. Despite stocks usually rising regardless of the party in the White House, Goldman Sachs analysis shows that the tech sector typically performs poorly in the year leading up to the general election, while utilities and consumer staples tend to outperform. In the short term, President Biden’s focus on green energy, crackdown on fossil fuels, and escalating tech rivalry with China are top concerns for investors. Trump’s trade policies and his commitment to boosting energy production are expected to have differing implications for stock portfolios.
Record profits for major oil companies
Energy policy is likely to be a key focus in the upcoming elections. Critics of Biden’s push for renewable energy argue that it has had a negative impact on the fossil fuel industry, but the sector has actually performed quite well under the current administration. Both Exxon Mobil (XOM) and Chevron (CVX) have reported record profits, and U.S. oil production has reached record levels. On the other hand, Trump’s promise to deregulate energy production and eliminate current renewable energy subsidies could benefit the oil industry, according to Keith Bliss, global head of markets and strategy for BloxCross. He believes that “Big Oil” will be able to expand exports to new markets and make even more money as a result.
However, Bliss warns that oil giants may face challenges if President Biden is re-elected, as his administration is likely to become more assertive.
Crackdown on China
Regardless of the election outcome, certain industries may encounter difficulties. The aggressive approaches of both Trump and Biden towards China have the potential to unsettle investors and corporate decision makers, according to Shehzad Qazi of China Beige Book. Trump’s decision to impose tariffs on China during his first term created unease among investors, while Biden’s efforts to crack down on China’s technological advancements have put chip giants in a tough spot.
Lee Munson, president of Portfolio Wealth Advisors, cautions that neither candidate bodes well for chipmakers like Nvidia, but Trump may pose a greater risk. A complete ban on sales to China could have a significant impact on American chip giants. China accounted for about one-third of the sector’s global sales in 2023, with leading AI companies like Nvidia (NVDA) and AMD (AMD) generating at least 20% of their revenue from the country. Munson adds that companies reliant on China for sales or supply chains will need to adapt.
Automakers grapple with EV costs
Since Biden took office, electric vehicle sales have soared, as automakers rallied behind the administration’s ambitious EV sales targets. However, the transition has proven to be costly for traditional automakers. Ford (F) recorded a $1.3 billion loss in its EV division in the most recent quarter, while General Motors (GM) is also facing losses in its EV segment.
According to Bliss, the “Big Three” could continue to face challenges if Biden is re-elected, as the government is likely to persist in promoting the EV narrative. The higher manufacturing costs have led to increased prices for EVs, posing an affordability issue. Ford CEO Jim Farley has pointed out the need for cost reductions in order to succeed in the market. He highlighted the interest of mainstream customers in EVs but emphasized the necessity to lower costs significantly.
Trump targets ESG
Environmental, social, and governance (ESG) focused investments have become a major focus for Republicans ahead of the 2024 election. Trump has been vocal about his opposition to ESG initiatives, pledging to support legislation to keep political influence away from Americans’ retirement accounts permanently. During the final months of his presidency, he sought to discourage employers from considering ESG issues for retirement plans, a rule which was later overturned by Biden.
The increased skepticism and regulatory scrutiny of sustainable funds have had a chilling effect on fund flows. According to Morningstar’s data, investors withdrew a total of $13 billion from US sustainable funds in 2023, marking the worst year on record.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. For tips on deals, mergers, activist situations, or anything else, email seanasmith@yahooinc.com. Click here for in-depth analysis of the latest stock market news and events moving stock prices. Read the latest financial and business news from Yahoo Finance.
