Investing Strategies to Play If Republican Trump Is Re-elected

The prime election day is breathing down one’s neck and the investing world is busy assessing the impact of a Democrat or Republican win. Polls are seemingly not favorable for President Trump at the current level if we go by a recent CNN report, which says that Republican Trump is down by about 10 points to Democratic presidential nominee Joe Biden nationally and in almost all the swing states.

However, Nov 3 is still about three weeks away and sentiments may change anytime. “With a little less than a month to go, the national polling aggregate has differed from the actual result by an average of a little more than four points since 1936,” the CNN article noted. One should not forget that Trump won the election in 2016 despite trailing the then-Democratic candidate Hillary Clinton in many polls.

In such a scenario, an investing case should be worked out in case Trump wins the race to the White House.

Trump Win Means Lower Taxes: Stocks to Rally

Unlike Biden, Trump is a proponent of lower taxes. Notably, President Trump’s tax law lowered the corporate tax rate from 35% to 21%, starting 2018. Though like many analysts, we believe that the tailwind from the tax cut is now “behind us,” corporate earnings are likely to soar higher amid a low-tax environment. iShares Core S&P Total U.S. Stock Market ETF (ITOT) and SPDR S&P 500 ETF Trust (ASX:SPY) SPY should be good bets in this regard.

Banks to Benefit

Banks have been key beneficiaries in the lower-tax environment. Big U.S. banks have enjoyed an average 13% increase to earnings per share from the lower rate, per Goldman Sachs (NYSE:GS). Banks also enjoyed easing of regulatory stringencies in recent years.

Moreover, lower tax rates would mean risk-on sentiments in the market, which would boost long-term treasury yields. This would further boost net interest margins and increase banks’ profits. SPDR S&P Regional Banking (NYSE:KRE) ETF (KRE) should get some respite amid coronavirus-induced troubles.

Zacks Rank #1 (Strong Buy) Allegiance Bancshares (NASDAQ:ABTX) Inc. (ABTX), which operates as a bank holding company, may gain. The company offers banking products and services primarily to small and medium-sized businesses and individual customers, through its subsidiaries.

Small Caps to Soar

Who doesn’t know about President Trump’s“America First” slogan and thesmall-cap surge in the Trump era? His intention to bring back foreign jobs to America boosted small-cap U.S. stocks in previous years. This is because small-cap stocks have greater domestic exposure and are unraveled by volatilities in foreign markets.

Increased activities in the domestic economy make the group a winner. As a result, the initial phase of the Trump rally led small-cap stocks to fare better than the S&P 500, the Nasdaq and the Dow Jones. Vanguard Small-Cap Growth Index Fund ETF Shares VBK is expected to gain if there is a Trump bump.

Infrastructure to Gain

The Trump administration is reportedly weighing a nearly $1 trillion infrastructure plan as part of its efforts to bolster the American economy. A preliminary version being prepared by the Department of Transportation would take care of most of the funding for projects such as roads and bridges, and would also keep money for 5G wireless infrastructure and rural broadband.

The present U.S. infrastructure funding law, known as the FAST Act, permits $305 billion over five years. The limit expired on Sep 30. However, President Trump signed a legislation extending the FAST Act for another year.

Hence, iShares U.S. Infrastructure ETF IFRA could gain if there is a Trump win. Defiance Next Gen Connectivity ETF FIVG should also gain. Zacks Rank #2 (Buy) Dover Corporation (NYSE:DOV) DOV, which is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment, should also stand to benefit.

Defense to be in a Decent Place

Trump’s latest budget plan calls for military spending of $740.5 billion, marking a 0.3% increase. Defense ETFs like Invesco Aerospace & Defense Portfolio PPA are thus expected to perform decently in the coming days. However, only a 0.3% increment suggests that growth in defense spending is probably nearing an end.

Zacks Rank #3 (Hold) Heico Corporation HEI, which is one of the world’s leading manufacturers of the Federal Aviation Administration (“FAA”) approved jet engine and aircraft component replacement parts, should benefit in case Trump wins.

Fossil Fuels to Benefit

Taking a completely different stance from Biden, Trump is in favor of pushing for more fossil fuel generation, be it from crude oil, natural gas or coal. This in turn may hit low carbon and clean ETFs like iShares MSCI ACWI Low Carbon Target (NYSE:TGT) ETF (CRBN) and benefit Big oil companies like Exxon Mobil Corp. XOM.

Zacks’ 2020 Election Stock Report:

In addition to the companies you learned about above, we invite you to learn more about profiting from the upcoming presidential election. Trillions of dollars will shift into new market sectors after the votes are tallied, and investors could see significant gains. This report reveals specific stocks that could soar: 6 if Trump wins, 6 if Biden wins.

Check out the 2020 Election Stock Report >>