Investment Insights

US Elections

US Presidential elections have the potential to impact the stock market, affecting investor sentiment and potentially affecting the economy. This article explores some of the potential impacts of US elections on the French stock market and the French 40 index, while also considering the risks and assumptions related to back-tested trading strategies.

As of my last update, the French stock market and the French 40 index are expected to experience a minor decline in the near term, with some investors expecting a small, temporary drop in the index price. However, the impact on the stock market and the economy is expected to be more significant and lasting, with some investors expecting a more substantial drop in the index price.

Accordingly, there are only 2 possible scenarios:

Strategic Recommendation:

Given the same, a few sectors of the stock market are expected to face heightened volatility and investor attention. Consequently, in line with the same, the following investment ideas emerge:

Donald Trump Presidency:

Long: Lockheed Martin (LMT), Tesla (TSLA), Chevron (CVX), Simon Property Group (SPG), Trump Media & Technology Group Corp. (DJT)** , iShares Russell 2000 ETF (IWM), and Coinbase Global (COIN)

**Note: DJT is a speculative bet suitable for aggresive investors alone.

Short: First Solar (FSLR), CVS Health (CVS), Tencent (TCEHY), and PDD Holdings (PDD)

Joe Biden/Kamala Harris Presidency:

Though the probability of Trump winning is high, Joe Biden's winning remains probable, as recent elections have shown that the election results have contrasted analyst expectations

Long: First Solar (FSLR), CVS Health (CVS), Rivian (RIVN), and Nvidia (NVDA)

Short: Chevron (CVX), CoreCivic (CXW), Altria Group (MO), Smith & Wesson Brands (SWBI)

Strategic Recommendation Summary

Current Probabilities

As of 12th July 2024, Donald Trump had a 57.2% chance of victory, and Biden had 15.4%. However, on 13th July 2024, at his campaign rally near Butler, Pennsylvania, Trump underwent an assassination attempt. In light of this, betting odds for Trump’s presidency have risen, and financial markets have begun to price a potential Trump presidency. Currently, Donald Trump has a 64.94% chance of winning the election in November, and current president Joe Biden has moved back to 13.53%. It must be noted that in 1981, Ronald Reagon, after his shooting, got a 7% boost in approval polls after the attempt.

Recommendation Rationale

Concerning the Trump Presidency, the companies that could could benefit from Trump's policies, include infrastructure companies and defense companies like Lockheed Martin. Trump Media & Technology Group Corp, which is predominantly owned by former President Donald Trump, may experience a significant rally. Small-cap stocks will also do well as they have historically performed well under Republican administrations. Trump’s tax policies will benefit those with high eective tax rates. Real estate stocks like Simon Property Group, as Trump has a background in real estate, may rise as well as he pushes for policies favorable to the sector. Energy stocks Like Chevron, particularly those involved in oil and gas, could also benefit, as Trump has supported the fossil fuel industry

Sectors that could potentially be aected by a Trump win include clean energy companies like First Solar. Trump intends to roll back policies favoring green energy and electric vehicle companies, however, this move will benefit Tesla as the rolling back of subsidies will adversely aect the EV imports into US, benefitting Tesla. Healthcare companies like CVS may also face increased uncertainty if Trump's administration moves to repeal the Aordable Care Act. Technology companies relying on global supply chains could also feel the impact of Trump's trade policies and potential taris on foreign goods. Furthermore, emerging market companies, like Tencent and PDD, that heavily depend on exports to the United States could also be aected by Trump's trade strategies.

Finally, Trump has expressed support for cryptocurrencies, pledging not to use regulatory authority against Bitcoin and indicating intentions to accept cryptocurrency donations for his campaign, which could lead to increased interest in digital assets and cryptocurrency exchange platforms.

Regarding the Biden/Harris Presidency, they advocate for healthcare reform. Hence, healthcare companies like CVS are expected to benefit. Their pledge to rejoin the Paris Climate Agreement and propose clean energy policies may also indicate favorable conditions for companies like First Solar and Rivian. Furthermore, the proposed $1 trillion infrastructure plan could benefit companies involved in infrastructure projects. Moreover, their commitment to increasing science and technology research funding may bode well for technology companies like Nvidia. Lastly, the proposed policies to increase the minimum wage and tax relief for the middle class may positively impact consumer discretionary companies.

Furthermore, given their aggressive stance for the need to take action towards rising climate change, stocks operating in this fossil fuel industry like Chevron could potentially be negatively impacted. Additionally, they voiced support for ending private prisons, which could impact businesses operating in the private prison sector like Corecivic. They have proposed reducing the defense budget, a position that may have potentially harmful implications for companies in the defense industry like Lockheed Martin.