Stocks and ETFs in Focus as Americans Head to Polls

Election Day has approached, and the polls indicate a tight race between Democratic Party candidate Kamala Harris and Republican nominee Donald Trump. Neither candidate holds a meaningful edge in enough states to win 270 electoral votes, reflecting one of the closest presidential races in American politics. 

Democrat Kamala Harris has experienced improving odds on election gambling sites and has a slight lead on PredictIt, although Polymarket continues to show Trump as the favorite. The tight race will bring heightened uncertainty and volatility to the stock market.

If we look at history, stocks typically rise after a presidential election. According to CNBC data, the three major benchmarks on average have seen gains between Election Day and the year-end in the presidential election years going back to 1980. This year's election comes amid a strong rally in stocks with major indices reaching a series of all-time highs. With a gain of about 20%, 2024 has seen the best first 10 months of a presidential election year since 1936, according to Bespoke Investment Group.

Potential Gainers/Losers

According to Forbes, a potential victory for Kamala Harris could lead to greater market surprises and shifts. If Donald Trump secures re-election, the markets could experience heightened volatility in the bond sector, alongside an increase in stock prices but with lower volatility, a research report by the Bank of Italy suggests. 

The outcome of the U.S. presidential election between Donald Trump and Kamala Harris is poised to significantly influence various sectors of the stock market. Let’s discuss these sectors and also the ETFs that might be impacted:

Energy

Companies such as Chevron CVX, Exxon Mobil XOM, and ConocoPhillips COP could benefit from Trump's policies favoring deregulation and expanded oil exploration, including increased fracking activities. ETFs like Energy Select Sector SPDR XLE and Vanguard Energy ETF VDE will gain.

Renewable Energy

Harris's focus on current President Joe Biden's push toward green energy and environmental regulations may challenge traditional energy firms but could boost renewable energy companies like NextEra Energy NXE, Plug Power PLUG and Bloom Energy BE. Investors seeking to bet on Harris's potential win could consider iShares Global Clean Energy ETF ICLN and First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN (read: Sector ETFs to Win If Kamala Harris Wins Presidential Election).

Homebuilders

Homebuilders like D.R. Horton (DHI), Lennar LEN, PulteGroup PHM, and KB Home KBH, and ETFs like iShares U.S. Home Construction ETF ITB and SPDR S&P Homebuilders ETF XHB might see gains in case of Harris beating Trump, as she has promised to incentivize first-time homebuyers and promote affordable housing.

Banks

Major banks such as JPMorgan JPM, Bank of America BAC and Wells Fargo WFC could benefit from anticipated tax cuts and deregulation under a Trump administration. As such, Invesco KBW Bank ETF KBWB and iShares U.S. Financial Services ETF IYG will also gain.

Cryptocurrency

Bitcoin is viewed by some as a so-called Trump trade as the Republican presidential nominee embraced digital assets during campaigning. Donald Trump is supportive of cryptocurrencies and has vowed to make United States the crypto capital of the planet. BlackRock iShares Bitcoin Trust IBIT and Grayscale Bitcoin Trust ETF GBTC could make the most of it (read: target= "_blank"5 ETFs to Tap the Ongoing Bitcoin Rally).

Healthcare

Shares of insurers like Humana HUM and UnitedHealth UNH could jump if the Democrats retain the White House, as Harris has proposed to expand insurance coverage. However, stocks of drugmakers like Pfizer PFE, Eli Lilly LLY, and Merck MRK could see weakness as she plans to impose a cap on prescription drug prices. That said, SPDR S&P Insurance ETF KIE and iShares U.S. Insurance ETF IAK could benefit if Harris wins, while iShares U.S. Pharmaceuticals ETF IHE and VanEck Vectors Pharmaceutical ETF PPH could lose.

U.S. Dollar

A clear win for Republican Donald Trump would lift the dollar, while a win for a Democrat candidate would push it a little lower. As such, Invesco DB US Dollar Index Bullish Fund UUP is in focus. It offers exposure against a basket of six world currencies. This is done by tracking the Deutsche Bank Long USD Currency Portfolio Index - Excess Return plus the interest income from the fund’s holdings of U.S. Treasury securities.

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