Biden vs Trump: Stocks that could benefit in the most likely US election outcome scenarios

With the US presidential election approaching in November, analysts foresee rising equity market volatility due to policy uncertainty.

The investment bank advises against making substantial changes to strategic portfolio allocations solely based on the elections but recommend considering near-term election risk management. “We expect equity market volatility to rise—it typically does—as Election Day approaches owing to policy uncertainty,” the analysts note.

The bank introduces two baskets of stocks that could benefit from the most likely election outcomes: a Trump victory with a GOP Congress or a Biden victory with a split Congress.

These stocks serve as a guide for expressing tactical election views and hedging election-related risks.

In a Trump administration, the focus would be on trade relations, higher tariffs, and lighter regulation. Higher tariffs could benefit domestic producers in sectors like steel, lumber, aluminum, and solar cells.

Additionally, traditional energy and financial sectors might gain from a more relaxed regulatory environment. “Less stringent antitrust enforcement could spur a pickup in M&A activity,” the analysts explain.

They believe a second Biden administration would likely continue the status quo, with potential higher corporate taxes to fund fiscal spending if Democrats capture both houses of Congress, although this scenario is deemed low probability.

The bank says a Biden win with a split Congress would rely on executive actions and regulatory oversight for climate change initiatives. Recent US Supreme Court decisions limiting federal agencies’ regulatory authority could constrain Biden’s implementation scope without Congressional support.

The bank cautions investors against positioning portfolios based on specific election outcomes due to the high uncertainty. Instead, they recommend flexibility to adjust portfolios as new information emerges.