It’s only July, but investors are already placing bets on Donald Trump returning to the White House. Energy, industrials, financials, and crypto have rallied. Solar and other clean-energy stocks have been a wreck.
Yet nothing is clear-cut with a presidential candidate who had the market doing backflips over his remarks during his prior term. And we’re seeing some of that now—turmoil is engulfing the tech sector over Trump’s recent suggestion that Taiwan should pay for U.S. protection.
It’s still early to align your portfolio for Trump 2.0. While he is ahead in most polls, Democrats could mount a comeback with another candidate, presumably Vice President Kamala Harris now that President Joe Biden has decided not to run for re-election.
Even if Trump prevails, the policy changes and their impact are far from clear. And much will hinge on Congress: The biggest policy changes in the past 15 years have come with one party in charge of both chambers and the White House, according to Wolfe Research. Without a Republican sweep, Democrats can put up roadblocks to tax cuts, tariffs, and other items on Trump’s agenda.
Energy’s Tug of War
Among the reasons to invest in energy are that “supermajors” such as Exxon Mobil are more financially efficient, the industry has consolidated through recent megamergers, and a Trump presidency is likely to delay a transition to renewables and electric vehicles, keeping oil and gas demand strong for longer.
Trump would be favorable for Exxon Mobil and oil-services company Halliburton, according to Evercore ISI analysts. They also see gains for EQT, a natural-gas company that could get a lift if, as expected, Trump scraps a Biden pause on new liquefied-natural-gas terminals. Other companies tied to that theme include Cheniere Energy and Sempra, along with pipelines such as Kinder Morgan, Targa Resources, and Williams Cos.
It may be the opposite for clean energy—a vast sector including wind, solar, battery technology, and electric vehicles. Solar stocks have tanked lately. Vistra, a utility with a heavy reliance on wind power, is down more than 10% in July.
Trump has signaled he would repeal subsidies for clean energy and EVs, but that will be tougher than it sounds. Many of the subsidies in the Inflation Reduction Act have fueled new plants and manufacturing in Republican districts, making repeal a tough lift in Congress even if Republicans manage to wrest control of the Senate and hold the House.
Trump can take other actions through executive orders and rule changes at the Treasury and Internal Revenue Service, making it tougher for consumers to claim the EV credits. Tesla CEO Elon Musk, who has endorsed Trump, said he wouldn’t care: “Take away the subsidies. It will only help Tesla,” he said on X. Yet other EV makers might suffer: Rivian Automotive, for instance, sold off this year as polls showed Trump gaining ground.
Some industrial firms in the automotive and broader clean-energy space might also get hurt. Baird analysts see negative consequences for companies like Lincoln Electric Holdings and Illinois Tool Works.
The financial sector would be a winner if economic growth picks up under a Trump presidency while rates ease, boosting lending activity. That may happen under another Democratic president’s term, too, with the Federal Reserve’s first rate cut likely coming in September. But Republican tax and trade policies could reignite inflation, complicating the Fed’s plans to cut rates through 2025.
The big hope on Wall Street is that mergers and acquisitions take off, fueling a new cycle of fees for investment banks like JPMorgan Chase, Goldman Sachs Group, Morgan Stanley, and Citigroup. Rich Nuzum, global chief investment strategist at investment firm Mercer, sees a higher likelihood of deal activity picking up under Trump.
The countervailing threat is that Trump’s pick for vice president, JD Vance, has indicated support for Biden’s Federal Trade Commission chair, Lina Khan, who has been hostile to mergers in tech and other areas. Some analysts see a tough slog for large-scale deals regardless of who wins the White House.
Trump has gone from calling Bitcoin a “scam” to putting protections for cryptocurrency in the Republican Party’s 2024 platform. He has also received campaign donations in crypto, mostly in Bitcoin and Ether. A prevailing sentiment is that Republicans in charge of regulatory agencies like the SEC would be more open to crypto products and services, bringing an end to SEC Chair Gary Gensler’s crypto hostility.
Bitcoin and Coinbase Global would be beneficiaries, along with fund companies like BlackRock that are backing Bitcoin ETFs, with more crypto ETFs likely on the way. But it may take the courts to settle an existential issue: which crypto transactions fall under the SEC’s remit. Related cases are now making their way through the judiciary and will likely reach the Supreme Court, a process that could take years.
Some advisors recommend a little crypto exposure in a diversified portfolio, though not more than 5% to 10%. Republicans’ goals to “defend the right to mine Bitcoin” would help miners like Marathon Digital Holdings and Riot Platforms, though their stocks ultimately respond to the price of Bitcoin and global demand trends.
One wild card is Vance. While he has ties to the tech industry, he has also been critical of its growing power, backing Khan’s actions against companies such as Alphabet, Amazon.com, and Meta Platforms. “Khan has been such a bulldog going after the Magnificent Seven, but you’ve seen some relief about concerns of more GOP pressure on Big Tech,” says Jeff Weniger, head of equity strategy at WisdomTree. “We’ll see if Vance throws a wrench in that.”
The reason to be bullish on tech, of course, is artificial intelligence, which is currently benefiting semiconductor companies the most. Once consumers and businesses start seeing AI integrated more into devices and software, then blue-chip tech stocks like Apple, Microsoft, and Alphabet, which trade at discounts to Nvidia, could get a bigger boost.
Investors shouldn’t make a wholesale change to their portfolios because of politics. If a Democrat wins, we can expect more of the status quo. That wouldn’t be bad; the market is trading near all-time highs, supported by a healthy economy, innovation like AI and GLP-1 weight-loss drugs, and easing inflation.
Keep in mind that a portfolio of 60% stocks and 40% bonds has fared virtually the same under Republican presidents versus Democrats in the Oval Office since 1860, according to Vanguard. Annual returns have averaged 8.1% under GOP presidents, compared with 7.7% for Democrats.
Better gains have come with one party in charge of it all: Since 1928, unified Democratic or Republican control has coincided with average annual returns for the S&P 500 index of roughly 9%, well above the 6% in divided government, according to Evercore.
If you’re really worried, consider gold, which has been hitting record highs and seems to have joined the Trump election trade, rising on prospects for more geopolitical instability and inflation.
“Gold stands out as a winner,” strategists at J.P. Morgan wrote in a recent report. Structurally bullish drivers are likely to remain intact, including worries about the debt, trade, and “America First” rhetoric, they added.
Gold is nowhere to be found in the GOP platform. Given the hurly-burly of Trumpian politics, that might be a good thing.
Yet nothing is clear-cut with a presidential candidate who had the market doing backflips over his remarks during his prior term. And we’re seeing some of that now—turmoil is engulfing the tech sector over Trump’s recent suggestion that Taiwan should pay for U.S. protection.
It’s still early to align your portfolio for Trump 2.0. While he is ahead in most polls, Democrats could mount a comeback with another candidate, presumably Vice President Kamala Harris now that President Joe Biden has decided not to run for re-election.
Even if Trump prevails, the policy changes and their impact are far from clear. And much will hinge on Congress: The biggest policy changes in the past 15 years have come with one party in charge of both chambers and the White House, according to Wolfe Research. Without a Republican sweep, Democrats can put up roadblocks to tax cuts, tariffs, and other items on Trump’s agenda.
Energy’s Tug of War
Among the reasons to invest in energy are that “supermajors” such as Exxon Mobil are more financially efficient, the industry has consolidated through recent megamergers, and a Trump presidency is likely to delay a transition to renewables and electric vehicles, keeping oil and gas demand strong for longer.
Trump would be favorable for Exxon Mobil and oil-services company Halliburton, according to Evercore ISI analysts. They also see gains for EQT, a natural-gas company that could get a lift if, as expected, Trump scraps a Biden pause on new liquefied-natural-gas terminals. Other companies tied to that theme include Cheniere Energy and Sempra, along with pipelines such as Kinder Morgan, Targa Resources, and Williams Cos.
It may be the opposite for clean energy—a vast sector including wind, solar, battery technology, and electric vehicles. Solar stocks have tanked lately. Vistra, a utility with a heavy reliance on wind power, is down more than 10% in July.
Trump has signaled he would repeal subsidies for clean energy and EVs, but that will be tougher than it sounds. Many of the subsidies in the Inflation Reduction Act have fueled new plants and manufacturing in Republican districts, making repeal a tough lift in Congress even if Republicans manage to wrest control of the Senate and hold the House.
Trump can take other actions through executive orders and rule changes at the Treasury and Internal Revenue Service, making it tougher for consumers to claim the EV credits. Tesla CEO Elon Musk, who has endorsed Trump, said he wouldn’t care: “Take away the subsidies. It will only help Tesla,” he said on X. Yet other EV makers might suffer: Rivian Automotive, for instance, sold off this year as polls showed Trump gaining ground.
Some industrial firms in the automotive and broader clean-energy space might also get hurt. Baird analysts see negative consequences for companies like Lincoln Electric Holdings and Illinois Tool Works.
Banks and Cryptocurrency
Deregulation could be a tailwind for the financial sector. The largest banks and financial firms, deemed systemically important, would love a rollback of stiffer capital requirements under the Basel III global framework. Project 2025, a conservative agenda, calls for Finra—the oversight body for broker-dealers—to be abolished as a separate entity and absorbed into the Securities and Exchange Commission.The financial sector would be a winner if economic growth picks up under a Trump presidency while rates ease, boosting lending activity. That may happen under another Democratic president’s term, too, with the Federal Reserve’s first rate cut likely coming in September. But Republican tax and trade policies could reignite inflation, complicating the Fed’s plans to cut rates through 2025.
The big hope on Wall Street is that mergers and acquisitions take off, fueling a new cycle of fees for investment banks like JPMorgan Chase, Goldman Sachs Group, Morgan Stanley, and Citigroup. Rich Nuzum, global chief investment strategist at investment firm Mercer, sees a higher likelihood of deal activity picking up under Trump.
The countervailing threat is that Trump’s pick for vice president, JD Vance, has indicated support for Biden’s Federal Trade Commission chair, Lina Khan, who has been hostile to mergers in tech and other areas. Some analysts see a tough slog for large-scale deals regardless of who wins the White House.
Trump has gone from calling Bitcoin a “scam” to putting protections for cryptocurrency in the Republican Party’s 2024 platform. He has also received campaign donations in crypto, mostly in Bitcoin and Ether. A prevailing sentiment is that Republicans in charge of regulatory agencies like the SEC would be more open to crypto products and services, bringing an end to SEC Chair Gary Gensler’s crypto hostility.
Bitcoin and Coinbase Global would be beneficiaries, along with fund companies like BlackRock that are backing Bitcoin ETFs, with more crypto ETFs likely on the way. But it may take the courts to settle an existential issue: which crypto transactions fall under the SEC’s remit. Related cases are now making their way through the judiciary and will likely reach the Supreme Court, a process that could take years.
Some advisors recommend a little crypto exposure in a diversified portfolio, though not more than 5% to 10%. Republicans’ goals to “defend the right to mine Bitcoin” would help miners like Marathon Digital Holdings and Riot Platforms, though their stocks ultimately respond to the price of Bitcoin and global demand trends.
A Wrench in Tech
Big Tech faces trade and regulatory hurdles in Washington regardless of who wins. A deeper trade war with China would hit the industry, and Trump’s comments on Taiwan have injected more instability into an already fragile situation. Reports that Biden might look to increase restrictions on chip exports to China haven’t helped.One wild card is Vance. While he has ties to the tech industry, he has also been critical of its growing power, backing Khan’s actions against companies such as Alphabet, Amazon.com, and Meta Platforms. “Khan has been such a bulldog going after the Magnificent Seven, but you’ve seen some relief about concerns of more GOP pressure on Big Tech,” says Jeff Weniger, head of equity strategy at WisdomTree. “We’ll see if Vance throws a wrench in that.”
The reason to be bullish on tech, of course, is artificial intelligence, which is currently benefiting semiconductor companies the most. Once consumers and businesses start seeing AI integrated more into devices and software, then blue-chip tech stocks like Apple, Microsoft, and Alphabet, which trade at discounts to Nvidia, could get a bigger boost.
Investors shouldn’t make a wholesale change to their portfolios because of politics. If a Democrat wins, we can expect more of the status quo. That wouldn’t be bad; the market is trading near all-time highs, supported by a healthy economy, innovation like AI and GLP-1 weight-loss drugs, and easing inflation.
Keep in mind that a portfolio of 60% stocks and 40% bonds has fared virtually the same under Republican presidents versus Democrats in the Oval Office since 1860, according to Vanguard. Annual returns have averaged 8.1% under GOP presidents, compared with 7.7% for Democrats.
Better gains have come with one party in charge of it all: Since 1928, unified Democratic or Republican control has coincided with average annual returns for the S&P 500 index of roughly 9%, well above the 6% in divided government, according to Evercore.
If you’re really worried, consider gold, which has been hitting record highs and seems to have joined the Trump election trade, rising on prospects for more geopolitical instability and inflation.
“Gold stands out as a winner,” strategists at J.P. Morgan wrote in a recent report. Structurally bullish drivers are likely to remain intact, including worries about the debt, trade, and “America First” rhetoric, they added.
Gold is nowhere to be found in the GOP platform. Given the hurly-burly of Trumpian politics, that might be a good thing.
