Fasten your seat belt.

That’s the message from Wall Street professionals as investors prepare for a close 2024 presidential election.

So far this year, the S&P 500 (^GSPC) rose 20%, making 2024 the best election year through October since 1936. But that outperformance could be at risk, at least immediately, as the too-close race is largely expected to trigger market volatility.

The Polymarket prediction market currently shows a 59.5% chance that Donald Trump will win the election, which has caused the so-called Trump Trade to return. Treasuries fell and gold rose again last week as investors bet that Trump’s proposed policies on tariffs and tax cuts could prove inflationary.

“The key for markets will be certainty of the outcome from which it will be possible to understand the economic impacts and assess the implications for the economic growth trend and assess the winners and losers in the sector,” Rob Haworth , senior investment strategist of US Bank Wealth Management, told Yahoo Finance.

Given the key themes that emerged from Trump’s and Harris’ respective campaigns, I asked a number of strategists what a Republican versus a Democratic presidency meant for business and for Wall Street and narrowed it down. list three business ideas for each scenario.

Trump trades: financial stocks, gold, managed care insurers

Financial data

Financial stocks are seen as one of the top trades under a Republican presidency due to expectations of looser regulation and increased mergers and acquisitions activity.

According to a recent Fitch Ratings rating, a July 2021 executive order under the Biden-Harris administration encouraging greater merger scrutiny has hampered transaction activity – guidance that is expected to change under Trump.

“Although no proposed merger has been formally refused since the directive came into force, approval times have lengthened considerably and, in some cases, to the point of making transactions unviable, as that market conditions have changed during the period under review,” Christopher Wolfe, head of North American banks for Fitch Ratings, wrote in a note.

Co-head of ElectionWatch at UBS Global Wealth Management Kurt Reiman told me that financial sectors stand out as a “key beneficiary” in both a red sweep scenario (meaning Republicans control the White House, Senate and House) and a Trump presidency with a Congress divided.

Reiman said a looser regulatory environment could lead to lower costs and a greater ability to return capital to shareholders, as well as a higher likelihood that consolidation in the financial services sector will face less resistance. .

On the other hand, Reiman and his team view Democrats controlling the White House, Senate and House of Representatives as the “worst case scenario” for financial services, in part because of the likelihood of greater support for the Credit Card Competition Act – a bill he passed. views as ushering in new regulations and stricter interpretations of current rules.

Jason Kupferberg of Bank of America echoed a similar sentiment. In a recent note to clients, Kupferberg and his team wrote that a Democratic victory would be the “worst-case scenario” for the payments industry for two reasons: a higher likelihood of a tougher stance on the DOJ lawsuit against Visa and the potential for new laws. to reduce visas (V) and Mastercard (MY) competitive advantage in the United States.

Gold

The expectation of increased spending under a second Trump administration has generated gold (CG=F) prices reach record levels. The precious metal closed the week at $2,734.44 per ounce, bringing its year-to-date gains to 34%.

And the race may be far from over, according to Wealth Alliance President Eric Diton.

“We simply do not have a plan as a country to deal with our growing $35 trillion debt…I have not heard any discussion of any spending cuts from either candidate,” Diton told me.

Although neither candidate appears to have a plan to address the nation’s growing deficit, a recent analysis by the Committee for a Responsible Federal Budget estimates that Trump’s policies could add $7.5 trillion to the national debt over the next 10 years. next few years, compared to $3.5 trillion under Harris.

Managed Care Insurers

Managed care insurers could see some relief under a second Trump administration because of the likelihood of greater support for privatized programs like Medicare Advantage — an approach long favored by Republicans.

And it could give a boost to companies like Humana (HUM), UnitedHealth (UNH) and CVS (CVS).

Oppenheimer’s Michael Wiederhorn named Humana the company’s “best idea” for a Republican sweep, noting that Medicare Advantage beneficiaries account for 87% of the company’s premium revenue.

“Key ways a Republican regime could support MA include large rate increases and a supportive regulatory environment,” Wiederhorn noted.

Harris businesses: electric vehicles, home builders, discount retailers

EV

This is a crucial election for the electric vehicle industry, and not just because of Trump’s close ties to Tesla (TSLA) CEO Elon Musk. On the contrary, the former president’s promise to reverse the Biden administration’s electric vehicle policies on “day one” could have significant implications.

“This week’s election, and the potential change in government regulations depending on who wins, will have more consequences for the auto industry than any previous election,” said the iSeeCars executive analyst. Karl Brauer said in a statement.

Earlier this year, RBC’s Tom Narayan told me that Trump’s “erratic” behavior during his first term had left the auto industry uneasy, and that they viewed his past threats as a challenge potential for their business if elected.

On the other hand, Harris has supported the current administration’s efforts to expand access to electric vehicles. She is widely expected to extend the Biden-era tax incentive of $7,500 for new electric vehicles and $4,000 for used electric vehicles — a credit that Ron said Jewsikow at the Guggenheim, is a “key affordability factor.”

Dan Ives of Wedbush sees a Harris ticket as a positive for General Motors (General manager), Ford (F), Stellantis (STLA) and the electric vehicle industry in general, including Tesla.

House builders

Harris’ promise to support the housing market and make housing affordability a centerpiece of his economic agenda is an optimistic sign for homebuilders, according to Oppenheimer.

The team, led by analyst Tyler Batory, sees Harris’ plan to build three million new homes and improve housing affordability as a key catalyst for the sector. The team named DR Horton (DHI) a premier housing play, demonstrating that the stock is “uniquely positioned” given its focus on entry-level housing.

“The company’s lower ASP (price) should benefit from increased demand through a tax credit, and its scale would allow for further acceleration of domestic production,” Batory wrote.

During the company’s third-quarter earnings conference call, Paul Romanowski, CEO of DR Horton, warned that affordability and election uncertainty had prompted “some buyers to stay away in the near term ”, which had repercussions on the entire sector. The SPDR S&P Homebuilders ETF fell 1.6% for the week, bringing its one-month loss to -8%.

Low-cost retailers

According to Evercore’s Michael Binetti, more social support under the Harris administration will boost off-price retailers.

“A blue sweep would likely benefit lower-income consumers and, in our space, Burlington stores have the lowest income demographic and a greater margin opportunity than Ross stores,” Binetti wrote.

Off-price retailers have outperformed this year as consumers search for value amid persistent inflation. Burlington Stores (BURL) reported better-than-expected profits and raised its outlook in its latest quarterly report, while Ross Stores (PINK) value offers helped increase sales by 7%. Burlington’s shares have soared 100% over the past year, while Ross’s shares have jumped 21%.

Sean Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on deals, mergers, activist situations or anything else? Email [email protected].

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