Good morning. As voters choose the next U.S. president, there’s a question of how the markets will react to the results. Analysts in the banking sector are weighing in.
A report released on Nov. 1 by J.P. Morgan Wealth Management notes that following an election, volatility in the stock market may be elevated. However, since 1984 there’s only been one election year where the market was lower 12 months after the election—in 2000, when the equity markets were grappling with the bursting of the tech bubble. “The Nasdaq 100 and S&P 500 tech sector sold off by double digits, while other sector declines were much more muted or in some cases produced gains,” Alan Wynne, a global investment strategist, writes.
For capital markets to be significantly impacted, we would likely need a decisive outcome, “meaning a sweep of the Presidency and both houses of Congress,” Rob Haworth, senior investment strategy director for U.S. Bank Asset Management states in an Oct. 29 report. Without one-party control, it’s difficult for "the most significant policy proposals to take effect," he explains, "and that’s when markets might become more reactive.”
However, it's possible that the election winner’s broad policy initiatives could have some capital market impact at the sector level. For example, “if Republicans win, there is likely to be more of a push for development of fossil fuels, while a Democratic win might further promote renewable energy development,” according to Haworth.
A recent edition of Goldman Sachs’s “Top of Mind” report states that: "Uncertainty around the U.S. election remains high, and we continue to think the outcome could have important implications, especially around trade, immigration, and fiscal policy."
The in-depth analysis compares the positions of Vice President Harris and Former President Trump on the federal corporate tax rate and tariffs, among other issues. There’s also a section where analysts discuss the implications of potential policy changes on the sectors they cover.
The banking sector, a bellwether for how the economy is doing, would be one to watch. Richard Ramsden of Goldman Sachs Equity Research writes: “The vast majority of bank earnings are domestic, and banks have fewer deductions than other sectors, which leaves bank earnings more sensitive to changes in the headline corporate tax rate than the average S&P 500 sector.”
Some experts think it's a win-win situation for the market no matter who is elected president. A survey conducted by Bloomberg finds that about half of investors think the stock market will maintain its pace or accelerate under a Harris presidency, while 59% believe the same under a Trump presidency. The survey of 350 respondents made up of economists, portfolio managers and investors believe certain asset classes will boom under either candidate.
In two new reports, Fortune provides an analysis of the five stocks to buy or sell if Harris or Trump wins the presidential election.
Sheryl Estrada
sheryl.estrada@fortune.com
Upcoming event: Join business's brightest minds and boldest leaders at the Fortune Global Forum, convening Nov. 11 and 12 in New York City. Thought-provoking sessions and off-the-record discussions feature Fortune 500 CEOs, former Cabinet members and global Ambassadors, and 7x world champion Tom Brady–among many others. See the full agenda here, or request your invitation.
The following sections of CFO Daily were curated by Greg McKenna
