While US voters are getting ready for another twist in the presidential race, market participants are revising their forecasts. Red-hot forecasts by UBS economists might help clear up the puzzle. If the Republicans manage to conquer the political Olympus, some industries are sure to benefit from their ruling.
For example, the financial sector anticipates a triumph, taking the most advantage of Trump’s presidency. Indeed, financiers under a Republican government have great skills in turning laws into figures on their balance sheets. The financial sector will certainly be on top owing to relaxed regulation and more opportunities for economic growth. No wonder, the domestic economy will click into gear. The sector rallied so much that even after the Trump-Biden debates and a failed assassination attempt, it remains the second-best performing sector on Wall Street.
What about the manufacturing and energy industries? These sectors always win when the economy is booming. The rules of the game are summed up in one phrase: start a plant—make money. Now, these sectors are looking forward to investors buying up such stocks. Interestingly, the energy sector, though it lost its investment luster after the 2016 elections, unexpectedly asserted itself as a market leader after the debates and the assassination attempt. It seems that the recovery in the energy world is just around the corner after political setbacks.
The commodity sector is also awaiting its moment of glory when all those environmental regulations will be declared void. Fewer restraints mean more opportunities for drilling and extraction. Therefore, commodity stocks will also grab their piece of cake.
However, healthcare might find itself in trouble. Trump’s idea of drug pricing based on "most favored nation" status looms over the industry like a dark cloud. But even here, there are heroes—Humana (HUM) and UnitedHealth (UNH) will perk up as soon as new insurance rules are introduced.
As for the high-tech sector, the outlook is bullish, though the sector operates by its own rules regardless of the political environment. No matter who wins, technology will extend its steady rally.
In investments, it seems that low price-to-earnings ratio stocks are ruling portfolios again. Such stocks were investors’ favorites after Trump’s victory in 2016 and they are still shining. On the other hand, investors betting on rapid returns may find themselves disappointed. Bullish stocks did not show a remarkable rally after the 2016 elections or recent events.
Last but not least, the S&P 500 index spiked by 21.5% immediately after Trump’s victory in 2016. However, life showed that the surge was short-lived. The broad-profile index returned to normal within a month. So, investors should stay alert as the market is always full of surprises!
