Will Trump or Biden Win? Wall Street Hedges Its Bets.
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What market risks are investors bracing for as Election Day approaches?
Here's your money briefing for Tuesday, October 13th. I'm J.R. Whelan for The Wall Street Journal. In the final weeks before November's presidential election, Wall Street is trying to gauge which candidate is likely to win and which sectors would benefit from it. But the ever-shifting landscape of the campaign is making it hard for investors or anyone with a 401k to keep up. Even in more normal times, Wall Street's best guesses are off the mark.
A lot of long term investors, people who advise clients are trying to urge patience and caution and not making any rash decisions. Because if you'll remember back in 2016, immediately after Trump was elected that election night, stock futures fell off a cliff. Then later that day and then the next day and beyond, investors cheered the prospect of tax cuts and deregulation. And then the market still went up.
Our markets reporter Amrit Ramkamar discusses where investors see growth in a win by former Vice President Joe Biden or re-election for President Trump and factors other than the election that could shape markets going forward. That's after the break.
Nobody knows for sure who's going to win next month's presidential election, but Wall Street is hedging its bets either way. With market volatility on the rise, individual investors with savings and retirement accounts in the market should prepare for a bumpy ride. Our markets reporter Amrith Ramkamar joins me now to discuss what professional investors are doing ahead of Election Day.
Are investors using polls or other data to hedge election outcomes?
Hey, Amrith, thanks for being here.
Thanks so much for having me.
So, you know, we hear a lot about how polls aren't any kind of guarantee, if 2016 taught us anything. But are investors using poll data to place their bets?
investors are using a lot of different data points to inform their opinions as we get closer to november people are really worried about possible disruptions due to mail-in voting and counting the ballots and the result or a contested outcome in the case of a presidential race that's why a lot of people are betting on volatility using things like cboe volatility index futures or even other haven assets like gold or even some currencies And yes, as polls have shown that Joe Biden's lead on Trump is increasing, they are ramping up their bets on a so-called blue wave, which could see Democrats also gain control of Congress. So that is showing up in certain sectors.
Which sectors are investors betting will benefit from a Biden victory?
But as you've said, historically, what we've seen is that many of these bets can often be misguided or they can become too extreme. So in general, people are definitely bracing for some volatility in both directions.
So in what areas are investors seeing a Biden win would move share prices higher?
Some of the sectors we see the biggest bets being placed in are energy and kind of sectors that could be more regulated. So let me start with energy there. We've seen big bets on green energy companies and companies tied to renewables. So Tesla, Sunrun, NextEra Energy, the iShares Global Clean Energy ETF is up some 80 plus percent this year. So That's, again, an area where even if Biden wins and the Democrats gain control of Congress, you could see a bit of a pullback just because of how much that sector has risen already, if that makes sense. A lot has been priced in about that. We've also seen private prison operators tumble on expectations of a Biden win because Trump's hardline stance on immigration and deportation was a big driver for those companies to
And Biden has proposed ending the federal government's use of these private prisons. Similarly, student loan servicers like Navient and SLM, they could be subject to more stringent regulations. And Biden has proposed canceling a lot of federal student debt outstanding.
How would a Biden corporate tax plan and fiscal policy affect markets?
So these are some of the sectors that would be most directly impacted by policy choices. And on a broad scale, investors are also considering what would a higher corporate tax rate under a Biden proposal mean. Goldman Sachs estimates that would slice about 9% off S&P 500 corporate earnings, but at the same time, lower tariffs, more clarity on policies generally, and greater fiscal spending could actually boost the economy as well and help companies.
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Chapters
7 chapters
1
What market risks are investors bracing for as Election Day approaches?
0:05–1:36
2
Are investors using polls or other data to hedge election outcomes?
1:36–2:30
3
Which sectors are investors betting will benefit from a Biden victory?
2:30–3:55
4
How would a Biden corporate tax plan and fiscal policy affect markets?
3:55–5:16
5
Which industries could gain if President Trump is reelected?
5:16–7:05
6
Why is the healthcare sector particularly uncertain ahead of the election?
7:05–8:17
7
What non-election factors could move markets after November?
8:17–8:57
Speakers
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