Would it be better to buy Nvidia or oil stocks if Trump returns to the White House? (David Becker via Getty Images)
As former President Trump gets closer to winning the Republican nomination, Biden and Trump are likely to compete in the presidential arena again, which deserves investors’ attention.
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For investors, history suggests strong performance in the year leading up to an election will carry over into the next. An analysis by Carson Group’s Ryan Detrick found that if the S&P 500 rises more than 20% in the year before an election, it will rise in every subsequent election year.
While history shows that stocks typically rise regardless of which party occupies the White House, Goldman Sachs’ analysis found that technology stocks are typically the worst-performing sectors in the year leading up to an election, while utilities and consumer staples tend to outperform.
In the short term, Biden’s push for green energy, his crackdown on oil and his escalating tech war with China are top issues facing investors. For Trump, regardless of his trade orientation and his promise to “drill for oil, drill to your heart’s content,” will have a different impact on stock investment portfolios.
Profits of major oil companies hit ceiling
Energy policy is likely to be a bipartisan priority in November.
Despite criticism that Biden’s push for renewable energy policies amounts to a war on oil, the industry has performed reasonably well under the current administration. Exxon Mobil (XOM) and Chevron (CVX) have seen profits peak, and U.S. oil production has hit a record high.
But Keith Bliss, global head of markets and strategy at BloxCross, said Trump’s campaign promise to deregulate energy production and eliminate current renewable energy subsidies would be another boon to the oil industry.
“The big oil companies will be able to sell to new markets as they please,” Bliss told Yahoo Finance. “When you combine the factors of lower costs, increased access to new markets, lower regulatory costs and the ability to produce more products with increased raw materials. Put it all together, and you know the big oil companies will make more money.”
Bliss, on the other hand, warned that oil majors would be “in trouble” if President Biden is re-elected, arguing that the administration could become “more aggressive.”
Suppress China
Both Trump and Biden’s aggressive stance on China are likely to “unsettle investors and corporate policymakers.” (Kevin Dietsch via Getty Images)
Regardless of who wins, some industries will face an uphill battle.
Shehzad Qazi, author of the China Beige Book, warned that both Trump and Biden’s aggressive stance on China could “unsettle investors and corporate decision-makers.”
“I think we’re going to see a lot of aggressive moves from the U.S. toward China,” Qazi told Yahoo Finance.
Trump’s decision to impose tariffs of up to 25% on China during his first term made investors nervous, while Biden’s moves to crack down on China’s technology development put the chip giant in the crosshairs.
Lee Munson, president of Portfolio Wealth Advisors, warned that while neither candidate would be good news for chipmakers like Nvidia, Trump could pose greater risks.
“Biden is not friendly to China, but Trump is worse,” Munson said on Yahoo Finance Live. “When you look at Trump, he’s so mercurial that he can turn off the water pipes… and tell Nvidia they can’t sell anything.”
A total ban could deal a huge blow to the U.S. chip giant. China will account for about a third of the industry’s global sales in 2023, with AI leaders like Nvidia (NVDA) and Advanced Micro Devices (AMD) deriving at least 20% of their revenue from China.
Automakers struggle with electric vehicle costs
Since Biden took office, electric vehicle sales have more than quadrupled as automakers respond to the administration’s ambitious EV sales targets. But it turns out that this transformation is costly for traditional car manufacturers.
Ford (F) lost $1.3 billion in its electric vehicle division last quarter; General Motors (GM) also lost money on its electric vehicles.
“They haven’t figured out the electric vehicle market yet, and if Biden is re-elected, the government will continue to push the electric vehicle story,” Bliss said. “The Big Three may continue to struggle.”
High manufacturing costs have pushed up the price of electric vehicles, making affordability a question. Ford President Jim Farley told Yahoo Finance this month that the company needs to cut costs to succeed.
“Mainstream consumers are interested in electric vehicles but haven’t made the decision to buy them or pay a lot of extra money,” Farley said. “So what that means for (manufacturers) is cost — they have to significantly reduce costs. “
2024-01-29 04:25:57
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