Stock market believes Joe Biden will defeat Donald Trump #stocks #business

 

#trump #biden #elections #bull #bluearrows

There are only two months left for the presidential election and the stock market is on the rise.

In theory, this should bode well for President Trump because a bull market has historically benefited the incumbent. But Trump lags Democratic rival Joe Biden in several national polls.

Although the sharp market recovery since March can be seen as a sign that investors are expecting the recession due to the Coronavirus to be short, you need to dig deeper and look at how the recovery is developing.

It turns out that the basket of stocks that could do well in the Biden presidency has outperformed the market as a whole - as well as a handful of stocks that could benefit from Trump's second term.

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Blue versus red arrows

According to data from Strategas shared with the media, the combination of infrastructure, renewable energy, pro-globalization, healthcare and hemp stocks have increased by more than 10% since early June.

The Biden list or the Blue List includes companies such as Granite Construction (GVA), Tesla (TSLA), First Solar (FSLR), Broadcom Chipset (AVGO) and iShares MSCI Germany ETF (EWG), which own several major German stocks.

The bet is that these companies may thrive if Biden wins and pushes the United States to rebuild highways and bridges, wean America off oil and restore fractured trade relations with China, Japan, Europe and other global economic leaders.

Investors also seem to believe that more affordable healthcare and more relaxed laws regarding marijuana use could be on the table if Biden is the next president. Likewise, insurance company Centene (CNC), hospital owner HCA (HCA), and Canadian cannabis company Canopy Growth (CGC) are in the "blue" wallet.

Meanwhile, a group of oil and fossil fuel producers, major defense contractors and bank stocks tracked by Stratigas, which may have performed better under Trump's second term, fell 9% in the past three months.

Driller Transocean (RIG), Peabody Coal Miner (BTU), Military Suppliers Lockheed Martin (LMT), Northrop Grumman (NOC), Bank of America (BAC) and Morgan Stanley (MS) are part of this "Red" basket.

The Federal Reserve may be more important than the President

This does not guarantee Biden winning. The market (and many political critics) have been known to underestimate Trump's chances and underestimate Hillary Clinton in 2016.

It's only September - a lot could happen in the two months leading up to the election. Trump could return to the polls after the discussions. Positive news about potential Covid-19 vaccines could benefit the incumbent as well.

But other experts also believe that Wall Street indicates that it expects Biden to win, and that this may be a good thing for the continued economic recovery.

First, there is a historic precedent for Biden to stick with incumbent Fed Chairman Jerome Powell, who has been praised for tackling the economic crisis of Covid-19 by lowering interest rates to zero and launching several new lending programs.

Biden’s former president, Barack Obama, stuck with George W. Bush’s Fed Chairman Ben Bernanke so that Bernanke could continue to manage the Fed’s response to the 2008 global financial crisis. In other words, Obama chose continuity over partisanship.

Trump can keep Powell for a second term. But the president frequently criticized Powell on Twitter and in press conferences for not moving fast enough to cut interest rates. He even criticized Powell for not cutting interest rates below zero, a risky move by Europe and Japan.

This makes Powell's reappointment under Trump less of a knockout.

"There may be a greater risk that Powell will be replaced under Trump than Biden," said Nella Richardson, investment analyst at Edward Jones, in an interview with the media. "Trump was criticizing Powell even when the economy and the market were doing well."

Richardson added, "This is only one reason why the outcome of these elections is not final and dry. Biden sets a precedent for Obama to keep Bernanke."

Another market expert noted that the market's usual reaction to White House policies (meaning a Democrat is bad because he will raise taxes while Republicans cut them) may not hold up in 2020.

"We tend to the conventional thinking that Biden = tax increases = harmful to the market," said Katie Nixon, chief investment officer at Northern Trust for Wealth Management in a recent report.

Nixon added: "There are more matters, and the differential calculations behind the total proposals are complex, with the impact of tax increases that are likely to be offset by reform of trade relations around the world."