If Biden wins, how will the markets react?

Find out the “Biden stocks” that could experience a surge if he wins November’s election – and the companies that could see a downturn

biden stock market                                 

Donald Trump’s Democratic challenger, Joe Biden, appears to be streets ahead in the polls when it comes to voting intention.

Of course, we’ve been down this road before. Hillary Clinton was polling handsomely in the fortnight before the 2016 election. Although she ended up winning the popular vote, the Electoral College didn’t end up going her way.

Now, Wall Street is attempting to suss out what a Biden stock market would look like. Here, we’re going to look at the stocks to buy if Biden wins – and examine the latest US stock market predictions.

USA 500
Daily change
4056.2
Low: 4053.3
High: 4066.8

What are the best Biden stocks?

Looking at the vice president’s policies can give us a valuable insight into the companies that will do well on the stock market if Biden wins.

One of his biggest priorities is tackling climate change, with plans to invest $2tn in green energy. As you can imagine, his electoral success would send shockwaves through the oil and gas sector – and potentially result in precipitous falls in the value of these equities, adding further pain to the industry following a slump in demand caused by COVID-19.

Biden’s plans are ambitious – he wants to make the entire country carbon neutral in 30 years’ time, not an easy feat, given the country’s penchant for gas guzzlers. But in a preview of stocks to buy after the election, it’s been instructive to see that the share prices of firms focused on clean energy have tended to experience an uptick whenever there is promising polling data surrounding his campaign.

You could also argue that Biden stocks could end up including Tesla, which has already enjoyed a wild ride under the Trump years. That’s because of how the Democratic candidate wants to pursue a policy of electrification – and invest heavily in infrastructure to ensure that car charging points are no longer difficult to find. The proliferation of charging points could help encourage motorists who may have been reluctant to invest in one of these high-end cars before.

Tesla Inc
Daily change
189.46
Low: 189.46
High: 193.34

Healthcare is shaping up to be another big winner in a stock market under Biden. One of his top priorities is expanding the Affordable Care Act (otherwise known as Obamacare, after his predecessor). Biden’s policies include getting the federal government to cover the cost of insurance if someone loses their job – and guaranteeing that all Americans would receive “free testing and treatment” for coronavirus, irrespective of whether they are insured or not.

As you can imagine, this could end up being big news for healthcare stocks – especially biotech companies and those that manufacture medical devices.

iShares U.S. Healthcare ETF
Daily change
268.25
Low: 266.37
High: 269.66

The losers under a Biden stock market

Of course, the US stock market forecast wouldn’t be rosy for the whole of the stock market. Big tech companies – including those that have been propping up Wall Street for most of the pandemic – could end up suffering if a Biden administration decides to pursue antitrust investigations and reduce their influence.

Many companies on Wall Street will also be eyeing Biden’s plans to hike up corporate tax rates with some degree of suspicion. Back in 2017, Trump signed radical cuts into law – slashing this rate from 35 per cent to 21 per cent in one fell swoop. Biden’s stock market is unlikely to be anywhere near as generous – and he is advocating for an increase of 28 per cent, halfway to where they were before. According to Goldman Sachs, this could result in company earnings taking a hit of 12 per cent.

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Goldman Sachs Group
Daily change
292.51
Low: 292.51
High: 294.77

Naturally, this has attracted warnings that it would hurt business, and some pundits have even warned that some firms could end up leaving the country altogether. Biden’s plan would also inflict pain on high net worth individuals, hiking up the top rate from 37 per cent to 39.6 per cent. Most of his measures would only apply to people who earn over $400,000 a year.

However, some argue that, under Biden, stocks and the wider market could enjoy a much-needed resurgence. There’s a decent chance that the Democrats could achieve a “clean sweep” come November 3 – meaning that they’d take control of the White House, the Senate and the House of Representatives. This is significant because of how it would allow Biden’s administration to push through his legislative agenda with little interference – and ultimately, it could prevent some of the new president’s bigger policies from being watered down.

This is especially important when we’re talking about the economic response to the coronavirus pandemic. Pressure is growing on Washington to pass a stimulus package that delivers much-needed financial relief to everyday Americans, but progress has been slowed by an impasse between Republicans and Democrats. There are warnings that the economy could suffer greatly unless a deal is reached, and it’s highly likely that a positive outcome would help fuel the markets.

That 12 per cent hit in earnings from the tax hike could also be offset by improved relations between the US and its international trading partners. According to data from JPMorgan, existing trade tariffs – including tensions with China – could have reduced earnings by 7 or 8 per cent on their own.

JPMorgan Chase
Daily change
134.27
Low: 133.36
High: 134.41

Biden also supports increasing the federal minimum wage to $15 an hour. It’s a popular policy among the American people, but it’s important to stress the financial impact that this could have on companies in the fast food, hospitality and tourism sectors – businesses that are already on razor-thin margins and struggling to survive in the wake of COVID-19. Such an increase would likely result in greater levels of inflation as businesses attempt to pass on the costs to their consumers, but overall, advocates say that it could help fuel levels of consumption. Worse still, a report from the Congressional Budget Office recently suggested that this would result in 1.3 million job losses if enforced nationwide.

Despite all of this, it’s worth bearing in mind that the Biden stocks impact is difficult to accurately predict at this stage. We don’t know what his presidential style will be, and how his administration will prioritise. Wall Street always reacts with caution when there’s a change of power – and COVID-19 means that it isn’t just the election driving the markets.

FURTHER READING: S&P 500 forecast: could we see new record highs?

FURTHER READING: USD forecast: are the dollar’s days numbered?

 

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