Would you like some Hillary Clinton or Donald Trump Stocks? Aside from the Federal Reserve’s regular meetings and statements, the US presidential election is the biggest event in the financial calendar this year. Most Wall Street analysts are assuming a balanced outcome from the election at the beginning of November. The current split in power is expected to be maintained. However, any other outcomes might result in a wave of volatility and longer-term uncertainty for the markets. If Democrats keep the Presidency and take Senate or Republicans take the Presidency and keep Senate, the current power balance would be upset and policy uncertainty will prevail.

Donald Trump Stocks the stocks to buy for a Hillary/ Donald Trump win
Donald Trump Stocks Photo by Michael Vadon

Both the presidential candidates have made it clear where their general bias lies on certain economic issues, even though it is difficult to pin down specific policies from either candidate. These issues include taxes, trade deals, favored types of infrastructure – such as green vs conventional energy, preference for monetary policy, and also their expressed views on industries such as Health Care and Energy. This will be the route of uncertainty for investors following the election. As there is no specific economic policy roadmap for either candidate, investors will be left guessing which sectors will be the first to benefit from new policies and which will be the first to come under fire.

Hillary/ Donald Trump stocks

Deutsche Bank’s US equity strategist David Bianco and team believe they have some idea which sectors will benefit the most in the event of a Republican win. In a research note issued to clients at the end of last week, Bianco writes:

“We think a Rep sweep could: 1) be good for some domestic oil producers, as it should permit more drilling, but negative to the recovery in oil and gas prices, as more supply, and thus negative for the broad Energy sector, 2) bring somewhat faster Fed hikes and a stronger dollar than otherwise, 3) the first two could lead to lower inflation and a flatter yield curve than otherwise would be. One could argue that Trump sized tax cuts and an infrastructure and defense spending spree would steepen the curve, but we think this unlikely while Republicans control the House.”

Although investors need to remember that the actions of the Federal reserve are probably more influential to market outcomes:

“If Fed hikes bring yield curve flattening then big banks and capital markets likely outperform small banks and insurance companies. Slow hikes that allow inflation to accelerate and steepen the curve might favor smaller banks and insurance, but this could pressure PEs at non-financials. If the Fed falls too far behind the curve, higher long-term rates could threaten the stock market, real estate and the overall economy.”

And here’s Deutsche’s stock cheat sheet for a Clinton or Trump win:

Industry pair trades and ETF ideas for Democratic vs. Republican Sweep

  1. Favor Health Care Services & Facilities over Drugs & Medical Devices
  2. Favor Engineering & Construction over Defense stocks
  3. Favor Small Banks & Life Insurance over Big Banks and Capital Mkts
  4. Favor Energy majors over Oil Services and smaller domestic E&Ps
  5. Favor Clean Energy & Social Media over Cheap Energy & Telco/Cable
  6. Favor Metals & Mining over Chemicals & Construction Materials

Dem: IHF, GEX, XME, SOCL, IWM, KBE. Rep: XPH, IHI, XOP, IGF, ITA, IYZ, VGT, XLF

Clinton 15 stock basket: UNH, HUM, MCK, ACM, PWR, XOM, AA, NEE, CREE, FSLR, FB, NFLX, PRU, C, UNP

Trump 15 stock basket: JNJ, PFE, MDT, NOC, LLL, HAL, DOW, DUK, F, MLM, VZ, CMCSA, SCHW, WFC, DAL