The US election – how to prepare your portfolio
There’s still all to play for in the US election race between Kamala Harris and Donald Trump. What will victory for either mean for investors?
The US election is nearly upon us and the contest between current vice president Kamala Harris and former president Donald Trump is heating up. Election outcomes “tend to have limited long-term impact on the broader economic cycle or overarching market trends”, as Gabriella Macari of Arbuthnot Latham points out, but the result can “heavily influence specific sectors, depending on the victor and their policy stances”. Here we take a look at how the sectors of the US economy will – or won’t – be affected by the election result.
Who will win the 2024 US elections: Trump or Harris?
What is the result likely to be? Picking the winner is difficult because the outcome is not based solely on who wins the national popular vote, but rather on who wins the Electoral College, with votes in the Electoral College based on the results of each state. This system tends to penalise the Democrats, who “waste votes by running up the score in a few states, but come up short in many others”, says expert Charlie Cook, who has been covering US elections since 1984. Another complicating factor is that, although the polls accurately reflected the final vote at the national level in both 2016 and 2020, they were thrown off in a couple of key states by largely Republican-leaning “low-trust” voters who are “generally unwilling to respond to surveys”. Pollsters have tried to correct for these biases, but to the extent that there is now a risk they have “oversampled Trump-like voters”, says Cook.
It “looks more likely than not that Harris will win the national popular vote”, but winning the electoral college, which is what really matters, “is at best a coin flip”. Cook isn’t alone in thinking the election could go either way. The betting markets and statistical mastermind Nate Silver has tended to make Harris a slight favourite, or put the contest at 50/50. There’s also the nightmare scenario of Trump losing the election, but still contesting it, says Paul Jackson of Invesco – this wouldn’t be a surprise considering that Trump would benefit from winning, given his legal woes and that his supporters have lost faith in the system, which means “we could end up with a volatile situation”.
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Kamala Harris: good for houses and renewable energy
But with Harris being the slight favourite, it makes sense to start by looking at what sectors would benefit if she wins. One victor would be the house-building industry, says Julian Wheeler of Shard Capital. She has pledged to give every first-time buyer a $25,000 grant towards a deposit for a house, and she has plans for tax changes that would create incentives to build more “starter homes”. The first policy could help boost the margins of housebuilding companies by pushing up prices; the second could genuinely boost supply and hence demand. Taken together, they should increase profitability in the industry, which would help firms at all levels of the supply chain, from those who make building supplies and appliances right down to those mining and quarrying firms who extract the aggregates. The recent uptick in housing permits “may be a sign that the industry is already starting to prepare for the pro-building policies that will follow a Harris victory”.
It also seems clear that Harris will continue the pro-renewable-energy policies of the current administration. In 2022, Joe Biden’s administration passed the Inflation Reduction Act, a “significant chunk” of which was dedicated to wind and solar energy projects, says Richard Wilson of Polar Capital. Such projects are likely to have their funding pulled if Trump wins, which would almost certainly mean they “fall by the wayside”, but they should continue to prosper under Harris.
Overall, Harris, like most Democrats, favours creating incentives to invest in climate change, agrees Ryan McNelley of financial and risk advisory firm Kroll. Harris is therefore “likely to come up with further tax incentives, both for those running renewable energy plants, and those investing in and building them”. Given that “no small part” of the financial sector’s sudden interest in renewable energy over the past few years is down to the introduction of government support, it’s pretty easy to see that this sector will be the big winner from a Harris administration.
Donald Trump: good for fossil fuels, financial stocks and crypto
A victory for Trump, on the other hand, would be much better for those involved in fossil fuels. The sector will benefit in two main ways, says Raheel Siddiqui of investment management firm Neuberger Berman. Trump is highly unlikely to continue Biden’s efforts to take a lead on reducing carbon emissions and clamping down on pollution. Indeed, Trump’s entire energy strategy is based on a deregulatory programme that aims to increase the production of fuels such as oil, gas and even coal, says Siddiqui. Trump has also signalled that he will end Biden’s freeze on approving terminals for the export of liquefied natural gas.
Financial stocks will also be clear winners from a Trump victory, says Wilson. They “did very well under Trump’s previous administration” as there “was a clear move to roll back red tape”, which should continue if he wins a second term. Trump may also extend the generous tax cuts for the sector, such as those he made to real estate investment trusts in 2017, which are currently due to expire next year. This is important, because if the cuts aren’t renewed many Reits will be left with a large tax bill, leaving investors “with blood in their portfolio”.
When it comes to financial services, Trump will be more “business-friendly”, agrees Susan Light, a partner at law firm Katten Muchin Rosenman. He is likely to repeal many of the rules passed over the last four years, and follow the blueprint of the Heritage Foundation, a conservative think tank that has devised “Project 2025”, which aims to “rein in financial service regulators”. (Harris, on the other hand, is likely to keep appointing regulators, such as the current SEC chairman Gary Gensler, who has “led one of the most aggressive rule-making agendas in decades”.)
Finally, Trump is also “likely to be the opposite of Harris when it comes to technology regulation”, says Wilson. Trump would carry out a “broad easing” of the regulatory environment, especially when it comes to financial technology and cryptocurrency – good for the shares of companies in those areas. (By contrast, the regulatory crackdown under Harris “would be even harsher than it currently is under Biden” – she is likely to continue the flurry of antitrust actions that has seen the Department of Justice launch multiple crackdowns against Google’s owner Alphabet, for example.)
Kamala Harris good for bonds, Donald Trump for shares
The election outcome will not only affect individual sectors, but may also have an impact on the wider economic environment. Indeed, Harris and Trump are “complete 180-degree opposites” when it comes to fiscal policy, says Wheeler. Harris has pledged to raise the corporate tax rate from 21% to 28%, for example, while Trump wants to cut it to 15%. In the short run, this difference “is roughly equivalent to 5% of the earnings of the S&P 500” – a Trump win would therefore provide a particularly big boost “for the shares of companies that earn most of their money in the US”.
Any boost to the wider economy provided by Trump’s tax cuts could, however, be outweighed by the fact that they would also expand the federal deficit, says Wheeler. Combined with Trump’s determination to hike tariffs on imports to the US, this would push up prices. This in turn could force the US central bank, the Federal Reserve, to call a halt to rate-cutting and raise interest rates – which would be bad for the market in US government bonds. There is even a good chance, Wheeler adds, that if Trump cuts taxes “while continuing to spend like a drunken sailor” there could be a US version of the mini-meltdown in bonds that accompanied Liz Truss’s brief time in office in Britain.
Wilson is also unimpressed by Trump’s tariff plans. His idea of imposing a 10% minimum charge on all imports into the US is especially “unworkable”, he says, and could lead to “strategically important American industries facing shortages of key raw materials”. Indeed, Trump’s plans are so extreme that he will be forced to tone them down – “you could end up hearing a lot more rhetoric” than seeing actual action, “certainly in the first year” of a Trump term. Yet, even so, firms that import goods from China will surely suffer under a Trump administration, and this will ultimately be bad for the dollar. Alex Crooke, fund manager of The Bankers Investment Trust also points out that “imposing tariffs tends to be zero sum game, with prices rising to offset the charges and other countries imposing their own tariffs”.
Sectors that will do well under either
Despite the differences in policy, there are some sectors that should do well regardless of who wins in November. Technologies that capture the carbon emissions from the least polluting fossil fuels, such as natural gas, will do well whoever wins power, says Richard Lum of VH Global Sustainable Energy Opportunities. Such technologies will help the US reach its goal of getting to net-zero carbon emissions by 2050, while still producing enough cheap power “to keep up with the explosion in demand from data centres”.
The same applies to nuclear power, says Siddiqui. That is one of the few non-fossil energy sources Trump seems to like, and he is planning to cut regulations on the sector. Indeed, successful efforts from both Democrats and Republicans to get nuclear power included in the industries to get subsidies under the Inflation Reduction Act show that it is one of the few industries to enjoy “clear bipartisan support” in an otherwise divided Congress, says Jags Walia of wealth manager Van Lanschot Kempen.
The pharmaceutical industry should also do well whoever gets into the White House. There has been plenty of “election-year rhetoric” about cutting drug prices, as Geoffrey Hsu of the Biotechnology Growth Trust points out, but further action is unlikely, especially if Congress ends up split between the Democrats and Republicans, as most people expect will happen (the Republicans are strong favourites to win the Senate). Even if the Democrats manage to pull off a clean sweep, further radical change is unlikely given that a bill has already been passed allowing Medicare to negotiate prices with drug companies on a range of drugs.
The overall regulatory environment is also “very constructive” for the approval of new drugs, and regulators are “increasingly willing” to give the green light to drugs that deal with unmet needs, even if they have a “less than perfect” dataset. So Hsu is very bullish on the industry. Neither presidential candidate is likely to stop large drug companies from buying smaller companies in order to refill their drug pipelines, either. The industry looks attractive, especially given that it is still trading at “unprecedentedly low valuations”.
How the US election will impact the markets
Just because a president has a friendly (or unfriendly) stance toward a particular industry doesn’t automatically mean that stock performance will follow suit, of course, says Frédérique Carrier of RBC Wealth Management. The US political system is “extremely decentralised”, as Anthony Kingsley of Findlay Park Partners points out, with power split between the White House, Senate and the House of Representatives, and state governments also playing a big role. And presidential policies often end up playing second fiddle to wider market trends. The classic case is that of shares in energy companies – they “did badly under climate-sceptic Trump, but have done well under Biden, despite his green leanings”.
Overall, whoever wins the White House, America will still retain some “incredible competitive advantages”, such as a “liquid capital market, the ability to generate new companies, a strong constitution and abundant energy”, says Kingsley. It will remain an “incredible landscape for investors” and the wider market will navigate any “short-term turbulence” caused by the person at the top.
How to invest around the US election
One investment trust that should do well from either Kamala Harris’s efforts to reduce carbon emissions or Donald Trump’s desire for cheaper energy is VH Global Sustainable Energy Opportunities Plc (LSE: GSEO). This investment trust is exposed to a range of sustainable energy infrastructure and projects – from hydro projects to battery storage and carbon capture – mostly in countries that are members of the EU and OECD club of developed nations. The company trades at a discount of around a third to net assets, has a dividend of around 7.5%, and an annual ongoing charge of 1.5%.
Another energy technology that falls into the “sweet spot” between renewables and fossil fuels is nuclear power. One way to benefit from a resurgence in the industry under either Harris or Trump is to buy shares in those companies mining uranium. The Sprott Uranium Miners ACC (LSE: URNM) exchange-traded fund invests in 38 key uranium miners on the North Shore Sprott Uranium Miners index, which has risen 58% over the past three years. Its largest holding is the Canadian firm Cameco Corp. The ETF has a total expense ratio of 0.8%, which is reasonable for such a specialised fund, and a dividend yield of 0.81%.
Unless the Democrats win both branches of Congress as well as the White House, the biotechnology sector should be relatively insulated from the political fallout of the election – and is so underpriced that even a clean sweep may not be too damaging. One investment trust worth considering is the Biotechnology Growth Trust (LSE: BIOG), run by Geoffrey Hsu and Josh Golomb. It consists of 68 holdings, the largest of which is Amgen. The ongoing charge is 1.2%.
If you think Harris will do well, you might want to consider Builders FirstSource, Inc (NYSE: BLDR), a supplier and manufacturer of building materials and manufactured components to house builders, sub-contractors and consumers. It has already doubled its sales between 2019 and 2023, and still trades at only 16.5 times 2025 earnings. Sven Anders of JPMorgan Asset Management likes Willscot Holdings Corp (Nasdaq: WSC), which specialises in portable offices, used primarily on construction sites. Revenue has tripled between 2018 and 2023, but the stock trades at only 17 times 2025 earnings.
One way to sidestep the worsening Sino-US relations that could occur under Trump is by investing in one of the countries in Southeast Asia, such as Malaysia, that are “increasingly becoming manufacturing hubs for global companies seeking to diversify away from China”, says Nigel Green of deVere Group. The Xtrackers MSCI Malaysia UCITS ETF (LSE: XCS3) tracks the MSCI Malaysia index, with an expense ratio of 0.5%.
Finally, one American fund with a long-term pedigree to get you through any short-term post-election turbulence is Findlay Park American Fund. It is run by Anthony Kingsley, Jon Tredgett and Paul Gannon, and aims to invest in companies that can deliver long-term growth, including many small and medium caps. It has an 83% activity ratio and, since it was established in 1998, has returned an annual average of 12.3% a year, far more than the S&P 500 or Russell 1000. It has ongoing charges of 0.84%.
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