Update to our US election baskets Update to our US election baskets Update to our US election baskets

Update to our US election baskets

Equities 6 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  The market was yesterday most likely creating a new narrative on a Biden victory which is that of potential clean sweep by the Democrats which could pave the way for the recently House approved $2.2trn stimulus bill. However, we are still not buying the net positive narrative as Biden will most likely hike corporate taxes creating a significant headwind for US earnings and thus we are still leaning towards a Trump victory being more positive for equities. We have updated our election baskets so that a Trump victory is now positive for health care stocks. The updated baskets do also include single stocks.


On Friday we put out our first take on US election baskets as a response to the first US presidential debate. But going back to 20 August we did an extensive list of green energy stocks that could gain on a Biden election win as his Clean Energy Revolution would increase spending and enact policies in favour of green energy stocks.

Our initial take ahead of the US election on 3 November was that Biden would be perceived as net negative for equities due to uncertainty over taxes and in particularly corporate taxes. According to Biden’s campaign details his proposed corporate tax hikes including hiking the GILTI (global intangible low-taxed income) tax rate which would apply mostly to technology and health care companies would be negative for the technology, communications services and health care sectors. This is also long-term the direction under a Biden administration and could create up to 10% headwind for S&P 500 earnings. More details can be found in the soon to be released Q4 Outlook. You can sign up here for Q4 2020 Quarterly Outlook live presentation on Friday.

What we saw yesterday in equity markets was mostly likely a reflation trade (long growth stocks and small caps) but also the market most likely pricing out the scenario for a contested election given Biden is gaining in the polls. Given this lean in polls the market may also be discounting a higher probability for a clean sweep by the Democrats (getting the majority in US Congress), which will make it more likely that the Democrats’ $2.2trn stimulus bill passed in the House (controlled by the Democrats) four days ago could go all the way after the election on a clean sweep victory. That would increase fiscal stimulus at a much-needed time as the US economy still lacks 4% more growth to be back at positive y/y growth. So, the market seems to be switching to a positive Biden win narrative for equities. We are not fully convinced and is thus not updating our election baskets on that account.

However, compared to the US election baskets presented on Friday we have changed two things. We have switched the positive oil & gas theme under a Trump victory to oil & gas exploration as this is a higher beta play on less strict environmental laws under Trump. We have also switched the health care theme under Trump victory from negative to a positive view given the Regeneron Pharmaceuticals story related to its antibody treatment of Trump and potential emergency approval by the FDA. You can read more about this story in our Quick Take and podcast from today. It seems more and more likely that the health care sector will have less FDA regulation under a Trump administration and from a shareholder perspective this could be interpreted positively if Trump wins.

The table is the same US election basket from Friday’s analysis but now updated with single stocks. We have put in the five largest stocks in each category selecting them from key benchmark indices. They are therefore not our direct single stock recommendations but inspiration for which single stocks are attached to each theme under a Biden or Trump victory.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.