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Elections 2020: if Trump surprises, JPMorgan strategists think these areas of stock market will be winners

·Anchor, Editor-at-Large
·3 min read
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If Donald Trump pulls another rabbit out of his red MAGA hat on Election Day, JPMorgan strategists think investors should go back to their post 2016 presidential election playbook to try and net some gains.

The game plan would favor buying U.S.-focused stocks over non-U.S. global equities, financials and industrials, say JPMorgan strategists led by Nikolaos Panigirtzoglou. These sectors of the market all outperformed the broader S&P 500 after Trump’s surprise win in 2016, according to JPMorgan’s analysis. Not that the S&P 500’s performance following Trump’s win in 2016 was something to scoff at — it gained about 7.5% from Election Day to the end of the year, shows Yahoo Finance Premium data.

“For the financials in the U.S., the reduced prospects for regulatory tightening could again see the sector gain in the event of a surprise Trump win,” points out Panigirtzoglou.

By contrast, consumer staples and tech could underperform again on a relative basis should Trump win re-election. For tech in particular, it stands to turn into a real whipping boy by the Trump administration (during a nothing to lose second term) on fears of rising monopolistic powers — as seen already in the new attack on Google by the Justice Department. Asian-focused equities could lag as well on concerns of an escalation in Trump’s trade war with China.

Panigirtzoglou sees muted gains in gold (it dropped after Trump’s 2016 win) and copper (it rallied hard last time) if Trump wins — the latter coming as the president has been unclear on an infrastructure plan.

Indian art teacher Sagar Kambli makes paintings of President Donald Trump and Democratic rival Joe Biden on a pavement outside his art school remaining closed due to the COVID-19 pandemic in Mumbai, India, Thursday, Oct. 29, 2020. (AP Photo/Rajanish Kakade)
Indian art teacher Sagar Kambli makes paintings of President Donald Trump and Democratic rival Joe Biden on a pavement outside his art school remaining closed due to the COVID-19 pandemic in Mumbai, India, Thursday, Oct. 29, 2020. (AP Photo/Rajanish Kakade)

With one day left before the election, a Trump win is looking like it would be a surprise yet again.

Trump trails challenger and former vice president Joe Biden by 10 percentage points nationally, per a new Wall Street Journal/NBC News poll. While Trump continues to hold broad approval for his management of the economy, the latest polling shows voters’ discontent with his handling of the COVID-19 pandemic.

The S&P 500 had rallied nearly back to a fresh record by mid-October on the view a Biden win and Congressional “blue wave” would usher in a badly needed stimulus plan. But investors have begun to poke holes in that thesis in what will emerge a bitterly partisan D.C. post election. The Dow Jones Industrial Average, S&P 500 and Nasdaq have each shed about 4% over the past five trading sessions.

“Prepare for volatility. Anything can happen and I think it will be a wild ride,” AlphaSimplex Chief research strategist Kathryn Kaminski said on Yahoo Finance Live.

Or in the view of JPMorgan’s Panigirtzoglou, perhaps prepare to watch Trump Surprise: Part 2.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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