Stock Market Trends and Election Outcomes: Getting Prepared for the 2024 US Elections with the Phillip Nova 2.0!

24 Oct 2024

By Danish Lim, Senior Investment Analyst for Phillip Nova

As the 2024 US elections approach, traders and investors are paying close attention to the potential stock market movements. Historically, election years are marked by increased market volatility, with political uncertainty often creating both risks and opportunities. However, it’s important to remember that while elections can cause short-term market fluctuations, economic conditions typically have a more lasting impact.

At Phillip Nova, we’ve prepared a powerful tool to help you navigate this crucial period.

Introducing the “US Election” category in Phillip Nova 2.0! This is where you’ll find a curated list of US stocks that are likely to be impacted by the election results. This feature enables you to make informed trading decisions as political shifts take shape.

Election Implications: Key Sectors and Stocks to Watch

Our analysts have identified several sectors and companies that may see significant movement based on the election’s outcome:

Potential Trump Administration:

A second term for Donald Trump is expected to lead to lower corporate taxes, deregulation, and pro-business policies, which could benefit several industries.

Sector ETFs to Watch:

Financials and Energy, as well as Bitcoin/Ethereum-related ETFs, are expected to rally due to Trump’s pro-crypto stance

Key Stocks to Watch:

Trump Media & Technology Group (Ticker: DJT)
Smith & Wesson (firearms manufacturer, Ticker: SWBI)
GEO Group (private prison operator, Ticker: GEO)
Rumble Inc (conservative video-sharing platform, Ticker: RUM)
Defense Contractors: Lockheed Martin (Ticker: LMT) and Raytheon Technologies (Ticker: RTX) are likely to see gains due to anticipated increases in defense spending

On the flip side, Chinese equities and semiconductor companies with exposure to China, such as Marvell, Lam Research, and KLA, could face headwinds due to potential tariffs and export restrictions on Chinese-made goods.

Trump’s Influence on Financials & Energy：

Under Trump, we expect to see deregulation and lower corporate taxes, which would benefit both the financials and energy sectors. The energy sector may see a revival in oil drilling and other deregulated activities, potentially driving stock prices higher. Financial stocks are likely to benefit from a steeper yield curve and relaxed regulations, boosting profitability for banks.

Potential Harris Administration

If Kamala Harris takes the presidency, expect a shift toward policies favoring clean energy and electric vehicles (EVs). Renewable energy stocks and companies involved in electric vehicles are likely to perform well.

Sector ETFs to Watch:

Renewable Energy and EVs, including the Invesco Solar ETF.

Key Stocks to Watch:

Solar energy companies like First Solar (Ticker: FSLR) and Sunrun (Ticker: RUN)
Rivian (electric vehicle manufacturer, Ticker: RIVN)
Albemarle (lithium producer, benefiting from increased demand for EV batteries, Ticker: ALB)
Healthcare stocks like Humana (Ticker: HUM) and CVS Health (Ticker: CVS) may experience pressure due to Harris’s healthcare reforms aimed at reducing drug prices

Harris and the Green Energy Revolution:

In contrast to Trump’s, a Harris administration could boost clean energy and electric vehicles, aligning with global trends toward sustainability. Stocks like First Solar, Sunrun, and Rivian are expected to perform well as government support for renewable energy industries grows. Health insurance stocks, however, may face challenges, as Harris is expected to push for healthcare reforms aimed at reducing drug prices and expanding coverage.

Prepare for Election-Driven Opportunities with Phillip Nova 2.0

We’ve done the heavy lifting for you. With our new “US Election” category, Phillip Nova 2.0 provides a carefully curated list of US stocks that are likely to be impacted by the election. Whether you’re interested in energy, financials, tech, or renewable sectors, this feature enables you to identify trading opportunities that align with potential political outcomes. To access the new curated category, head to your Watchlist>+Add>click on the “US Election” category.

Where the new US Election category is located.

Products available in the new curated category.

Phillip Nova 2.0 gives you the tools to stay ahead of election-driven market shifts and make informed trading decisions with ease.

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An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12^th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

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Trade in both the bull and the bear markets
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