As former President Donald Trump moves closer to winning the Republican nomination, the possibility of a rematch between Biden and Trump has become a top concern for investors.
For investors, history suggests that a strong pre-election year will carry over into the following year. The S&P 500 index has risen in each election year after rising more than 20% in the year before the election, according to an analysis by Ryan Detrick of Carson Group.
And while history has shown that stock prices typically rise regardless of which party is in the White House, Goldman Sachs analysis shows that they typically rise in the lead-up to a general election. Technology is the worst-performing sector in 2020, while utilities and consumer staples tend to outperform.
In the short term, President Biden's green energy push, crackdown on fossil fuels, and escalating tech war with China are among the top issues for investors. For Trump, the former president's trade policies and “drill baby, drill” pledge have a different impact on his stock portfolio.
Record profits for oil giants
Energy policy is likely to be a priority for both sides in November.
Critics of Biden's push for renewable energy say he is waging a war on fossil fuels, an area that has fared extremely well under the current administration. Exxon Mobil (XOM) and Chevron (CVX) reported record profits, and U.S. oil production reached record levels.
But President Trump's campaign promises to deregulate energy production and eliminate current renewable energy subsidies will be an added boon for the oil industry, according to Keith Bliss, head of global market strategy at BloxCross. .
“Big oil companies will be able to export to as many new markets as possible,” Bliss told Yahoo Finance. “When you add up lower costs, access to new markets, lower regulatory costs, and the ability to produce additional products through increased feedstocks, big oil companies could benefit even more.”
Meanwhile, Bliss warned that big oil would “suffer” if President Biden is re-elected, arguing that the administration is likely to become “more aggressive.”
crackdown on china
No matter who wins, some industries will face an uphill battle.
China Beige Book's Shehzad Kazi warned that both Trump and Biden's aggressive stance toward China could “confuse investors and corporate decision makers.”
“We're going to see a lot of aggressive maneuvering on the China front,” Qazi told Yahoo Finance.
President Donald Trump's decision to impose tariffs of up to 25% on China in his first term has left investors nervous, while Mr. Biden's efforts to crack down on China's technological advances have targeted semiconductor giants.
Lee Munson, president of Portfolio Wealth Advisors, cautioned that while neither candidate is good news for chip makers like Nvidia, Trump could pose a greater risk.
“Biden hasn't been friendly to China, but Trump is going to be even worse,” Munson said on Yahoo Finance Live. “If you look at Trump, he can turn off the faucet on a whim…and tell NVIDIA they can't sell anything.”
A total ban could be a huge blow to the U.S. chip giants. China will account for about a third of the sector's global sales in 2023, and AI leaders like NVIDIA (NVDA) and AMD (AMD) derive at least 20% of their revenue from China.
“Companies that rely on China for their sales and supply chains will need to adapt,” Manson added.
Automakers struggle with EV costs
Since Biden took office, electric vehicle sales have more than quadrupled as automakers have jumped on board with the administration's ambitious EV sales goals. However, this transition is proving costly for traditional automakers.
Ford (F) posted a $1.3 billion loss on its EV division in its most recent quarter. General Motors (GM) is also losing money on EVs.
“The government hasn't figured out the EV market yet, and once Biden returns, the government will continue to push the EV story,” Bliss said. “The Big Three may continue to struggle.”
Affordability has become an issue as EV prices have skyrocketed due to rising manufacturing costs. Ford CEO Jim Farley told Yahoo Finance earlier this month that the company needs to cut costs to succeed.
“There are mainstream customers who are interested in EVs, but they're not convinced and they're not willing to pay a big premium,” Farley said. “So what does that mean? [manufacturers] What matters is cost. Costs need to be reduced significantly. ”
President Trump targets ESG
Investing with environmental, social, and governance (ESG) factors in mind is a top goal for Republicans heading into the 2024 election.
President Trump has been vocal in his opposition to ESG initiatives, pledging to support “legislation that permanently removes politics from Americans' retirement accounts.”
In his final months in office, he pushed to block employers from considering ESG issues in their retirement plans, a rule that was later overturned by Biden.
Growing skepticism and scrutiny of sustainable finance by politicians and regulators is having a chilling effect on financial flows. Investors withdrew a total of $13 billion from U.S. sustainable funds in 2023, making it the worst year on record, according to Morningstar data.
sheena smith Anchor of Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email seanasmith@yahooinc.com.
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