What Happens To The Market If Trump Wins?

By Nicholas Jasinski |  Friday, October 23 What If? Investors were little swayed by last night's presidential debate, and major indexes spent most of the day hovering around the break-even line before rising modestly into the close. The second debate was a more substantive and orderly affair than the first one, but it appeared unlikely to meaningfully change most Americans' minds on how they'll vote on Nov. 3. The Dow Jones Industrial Average closed down 0.1% today to end the week down 0.9%. The S&P 500 added 0.3% today, for a 0.5% loss this week, and the Nasdaq Composite fell 0.4%, for a 1.1% weekly decline. Betting odds have strongly favored former vice president Joe Biden over the incumbent, President Donald Trump, for most of the past six months, and they didn't budge on Friday. Roughly 50 million Americans have already voted. The stock market has likewise priced in a Biden victory next month, Reshma Kapadia wrote today. That means that if Trump pulls out a last-minute upset, the shock to the market could be significant. Recall, stocks ripped higher after his surprise victory in 2016. But that doesn't mean the potential playbook for 2020 would be the same. Here's Reshma: What worked for investors in 2016 won’t work now, in part because the country is in the midst of its worst economic recession since the Great Depression and the Federal Reserve has indicated it will leave rates near zero for the foreseeable future. That is in contrast to the weeks after the 2016 election, when the outlook for growth improved markedly and led to higher interest rates and commodity prices, as well as a strengthening dollar. Investors expected a large tax cut and increased spending on infrastructure—and few anticipated an all-out trade war, [Wolfe Research Chief Investment Strategist] Chris Senyek said. Instead, the potential market impact of a Trump upset would likely be more industry-specific than macro. Energy companies stand to gain relatively from avoiding a Biden presidency, while defense contractors could more confidently count on increasing military spending,  according to Senyek. Reshma also points to a friendlier regulatory climate for banks, chemical companies, and private prisons under a second Trump term. That's not currently priced in to their stocks, and they could shoot higher if Trump pulls out a victory. On the other hand, stocks exposed to green energy, those sensitive to U.S.-China trade relations, and those counting on an expensive infrastructure package could have some room to fall. Many of those have outperformed the market in the lead up to the election. Expect volatile trading in those industries should there be any additional October surprises between now and election day.  As if that wasn't enough, investors are also looking ahead to a huge week for third-quarter earnings coming up (more on that below). No fewer than 170 S&P 500 companies are scheduled to report, plus many dozens more from outside the large-cap index. There's plenty to keep investors busy, even if the day-to-day moves in the S&P 500 or Dow haven't been large.   Watch our TV show on Fox Business Friday at 10 p.m. or 11:30 p.m. ET; Saturday at 10 a.m. or 11:30 a.m.; or Sunday at 7 a.m., 10 a.m., or 11:30 a.m. This week, see an interview with Scott Galloway, professor at NYU Stern School of Business, on tech regulation and the Justice Department's antitrust suit against Alphabet.

 

DJIA: -0.10% to 28,335.57 S&P 500: +0.34% to 3,465.39 Nasdaq: +0.37% to 11,548.28 The Hot Stock: SVB Financial Group +4% The Biggest Loser: Intel -10.6% Best Sector: Communication Services +0.9% Worst Sector: Energy -0.5%