As the political landscape heats up, investors are increasingly looking at potential outcomes of the 2024 U.S. presidential election, with Donald Trump currently pulling ahead in the polls. This political momentum is impacting various sectors, notably energy, technology, financials, and cryptocurrency, as market participants try to anticipate the potential changes a Trump administration might bring.
Energy Sector Dynamics
The energy sector is experiencing a tug of war. The Republican Party’s 2024 platform includes the catchphrase “Drill, baby, drill,” reminiscent of Trump’s first term. Despite this pro-fossil fuel stance, the sector’s performance under Trump’s initial tenure was lackluster, with a 30% decline in total return, exacerbated by the COVID-19 pandemic and low oil prices. Conversely, under President Joe Biden, the sector has seen a remarkable 148% return, despite his administration’s promotion of renewable energy and rejoining the Paris Agreement.
The global market is currently awash in oil and gas, making significant production increases less attractive to companies. J.P. Morgan analysts noted that even at $60 per barrel, prices remain too low to incentivize new production. Moreover, an end to the war in Ukraine, a goal Trump has emphasized, could flood the market with Russian gas, further depressing prices.
Investors might consider major players like Exxon Mobil and Halliburton, which analysts believe could benefit from Trump’s energy policies. Natural gas companies like EQT, Cheniere Energy, and Sempra could also see gains if Trump lifts the current administration’s pause on new liquefied natural gas terminals.
Clean Energy Sector Challenges
Clean energy stocks have struggled, with Trump signaling a potential repeal of subsidies and support for electric vehicles (EVs). This stance poses a significant challenge to companies heavily invested in renewable energy. Despite this, repealing subsidies might prove difficult, given that many benefits from the Inflation Reduction Act have supported new projects in Republican districts.
Trump could implement changes through executive orders and agency rule adjustments, potentially impacting consumer claims on EV credits. Tesla CEO Elon Musk, an endorser of Trump, has stated that removing subsidies would benefit Tesla, although other EV manufacturers like Rivian Automotive have seen stock declines as Trump gains in the polls.
Financial Sector Outlook
The financial sector could see benefits from deregulation under Trump, with hopes of rolling back stringent capital requirements. Project 2025, a conservative agenda, proposes significant changes, including abolishing Finra and integrating it into the SEC. The sector would also benefit from economic growth and easing interest rates, though Trump’s tax and trade policies could complicate inflation and rate cut plans.
The potential for increased mergers and acquisitions activity under Trump is high, promising new fee cycles for investment banks such as JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Citigroup. However, Trump’s Vice President, JD Vance, supports FTC Chair Lina Khan’s anti-merger stance, which could hinder large-scale deals.
Cryptocurrency Prospects
Trump’s evolving stance on cryptocurrency, once calling Bitcoin a “scam,” now includes protections for cryptocurrency in the Republican platform. His administration might be more open to crypto products, benefiting Bitcoin, Coinbase Global, and fund companies like BlackRock.
Nevertheless, regulatory clarity is still a long way off, with critical cases likely heading to the Supreme Court. Advisors suggest maintaining a diversified portfolio with a small allocation to crypto, considering the Republican goal to defend Bitcoin mining, which could benefit miners like Marathon Digital Holdings and Riot Platforms.
Tech Sector Uncertainty
The tech sector faces uncertainties regardless of the election outcome. A deepening trade war with China could impact the industry, and potential restrictions on chip exports to China add to the challenges.
Trump’s Vice President, JD Vance, has ties to the tech industry but has also criticized its growing power, supporting Khan’s actions against major tech companies. The rise of artificial intelligence offers a bullish outlook for tech, benefiting semiconductor companies and blue-chip stocks like Apple, Microsoft, and Alphabet.
Conclusion
Investors must navigate a complex landscape as the 2024 election approaches. While historical data suggests similar returns under Republican and Democratic presidents, market reactions to specific policies and political shifts will be crucial. Maintaining a balanced and diversified portfolio remains essential, with sectors like energy, financials, and tech requiring close attention to political developments. Gold, reaching record highs, also stands out as a potential hedge amid the uncertainties of Trumpian politics.