V2U Research

The US presidential election in 2024 is one of the most trending topics among investors. On July 22, 2024, President Joe Biden announced his exit from the Presidential Election 2024 and endorsed Vice President Kamala Harris as his successor. However, she still needs to be officially nominated by the Democratic Party, with a vote due in August 2024. Following this news, Wall Street zoomed up after three days of sell-offs, with most indices trading in green. At 1:38 PM ET on July 22, 2024, the NASDAQ Composite Index is up 1.60% to 18,009.93, the NASDAQ-100 is up by 1.55%, Dow Industrial is up 0.26% to 40,392, and the S&P 500 is up 1.05% to 5,562.90. Tech giants like NVIDIA, AAPL, AMD, META, MSFT, etc. surged over 1.2%.

After the exit of Joe Biden from the US presidential election race, Donald Trump is assumed to be the favourite candidate, and Vice President Kamala Harris is assumed to be the second favourite for the upcoming election.

With this backdrop, let us look at the sectors that might boost post-election if Donald Trump is re-elected as President of the United States. For that, let’s understand Donald Trump’s plan for the second term.

Donald Trump’s plan as US President after the election:

Former President Donald Trump has promised to return to things as they were before COVID-19.

1. Donald Trump has promised low inflation, a low interest rate, and higher growth, and he will bring manufacturing back to the US.

2. In his plan to reduce inflation, Donald Trump said that he will open more oil drilling and energy exploration in the US as a means to increase the supply of energy and reduce the gas price.

3. Donald Trump promised to cut corporate tax as low as 15%, which is currently 21%, and Democrats propose to increase it to 28%.

4. On the tariff side, Donald Trump will impose a 60–100% tariff on China and a 10% across-the-board tariff on imports from other countries, as many countries do not import enough from the US.

5. On the US-Taiwan relationship, Trump indicated that if he is elected again as US President, the policy for defending Taiwan could change. He said that the US will stand for and protect Taiwan against Chinese aggression.

6. Other than that, Donald Trump will scrap Biden’s policy on renewable energy and electric vehicles and address illegal immigration with the largest deportation program.

Analysis:

Keeping in mind the above plans proposed by the former president, we can expect the below sectors to boom post-election.

1. 1. Low Inflation, Low Interest Rate: In cases of low inflation and a low interest rate, sectors that are likely to outperform include consumer discretionary, technology, real estate, and the financial sector. The consumer discretionary sector is likely to benefit from increased consumer spending and stable costs,while the technology sector may see higher valuations and profitability due to cheaper financing and stable input costs. Lower borrowing costs will drive demand and investment in the real estate sector. Also, stable inflation will support predictable costs and rents. The financial sector will have a mixed impact, with pressure on margins but potential for increased lending activity and reduced credit risk.

2. 2. Open More Oil Drillings and Energy Exploration in the US: The opening of new oil drilling and energy exploration will have a significant impact on the US economy. It will result in new job creation in the oil and gas industry and allied businesses like transportation, manufacturing, and services. New drilling projects will attract domestic as well as foreign investment. Further, a higher level of oil production will help the country meet the demand of individuals as well as businesses at a lower cost via domestically produced oil and gas. Also, a higher level of oil production can contribute to GDP growth through increased industrial output and export opportunities. If the US is able to produce more oil, it can also export more oil and improve its trade balance.

3. 3. Lower corporate tax: If the government reduces the corporate tax, the company will have increased after-tax income. Thus boosting profitability. With more profitability, the companies would be in a position to reinvest in their operations, leading to expansion, innovation, and increased competitiveness. These companies will also be in a position to provide a good dividend to their investors. Further, increased profitability and investment can lead to job creation as companies expand their operations. They can also pay better wages and benefits to attract and retain good talent. Increased profitability will help the company improve its financial health through debt reduction and help build cash.

4. 4. Tariff Policy: Trump aims to bring manufacturing back to the US. By imposing 60 to 100% import duties on China, Trump aims to give a boost to the US manufacturing sector. At the same time, by charging only 10% import duty to others, he is trying to increase trade by reducing the cost of imported goods. Also, through reduced import duties, Trump is aiming to improve trade relations with other countries by fostering a more open and cooperative trading environment. Lower duties can facilitate the negotiation of trade agreements, leading to broader economic benefits and increased market access for exporters.

5. 5. Protecting Taiwan from China: By protecting Taiwan from China, the US intends to maintain regional stability, protect key economic interests, uphold democratic values, counter Chinese expansion, and maintain its global leadership and credibility. Besides, Taiwan is the major trading partner of the United States, and it exports technology and electronics, including semiconductors, which are crucial for various industries globally. Taiwan is also home to some of the world's leading technology companies, such as Taiwan Semiconductor Manufacturing Company. A report from the U.S. International Trade Commission highlighted that around 44.2% of U.S. imports of logic chips were manufactured in Taiwan. Any disruption in Taiwan could impact global technology markets and the US economy.

6. 6. Deportation of illegal immigration: The deportation of illegal immigration will open more job opportunities for citizens. They will have a better wage. It will also reduce the burden on public services such as education, healthcare, and welfare, which they claim are disproportionately utilized by illegal immigrants.

Sectors to watch after the election:

In the event that Donald Trump is elected for the second time, we can expect almost all sectors to improve. However, the sectors that could gain investor attention could be consumer discretionary, technology, real estate, the financial sector, oil and gas, transportation, manufacturing, and services.