U.S. Democratic presidential candidate Hillary Clinton and Republican candidate Donald Trump are in a tight race ahead of the Nov. 8 U.S. presidential election.
Following is a weekly roundup of financial market analysts' views on the U.S. elections and the likely implications of a Trump or Clinton win on financial markets.
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DAVID KOSTIN, U.S. PORTFOLIO STRATEGY RESEARCH, GOLDMAN SACHS
"A so-called 'wave election' would occur if one party registers large congressional seat gains and has the potential to implement policy changes... Following six prior 'wave elections,' S&P 500 typically fell during the subsequent 1 and 3 months. Our strategies: buy health care equipment and services/sell pharma and biotech; own firms with high government sales; (and) own high overseas cash."
CHRIS SENYEK, CHIEF INVESTMENT STRATEGIST, WOLFE RESEARCH
"Whether it's Hillary or Trump, the U.S. is unlikely to break out of secular stagnation. With respect to the election, our focus will remain on the impact that the next U.S. president will likely have on fiscal and monetary policies, as well as the global growth outlook. Unfortunately, we don't see either candidate as likely to purse a true ‘pro-growth’ agenda that will break the U.S. economy out of its current malaise."
Interest rates: "We see rising upside risk for longer-term U.S. rates, regardless of the outcome in November. The biggest upside risk for a sustained increase in longer-term rates is rising risk premiums."
Credit growth: "With Trump's negative comments regarding Dodd-Frank, our sense is a Trump victory could jumpstart lending. We believe a Hillary win would create even stiffer headwinds and more regulation for the financial services industry."
- Buy on Clinton win, sell on Trump win: alternative energy, housing and REITs, hospitals and managed care, exporters and companies with international exposure
- Buy on Trump win, sell on Clinton win: exploration and production, banks, big pharma and biotechnology, high tax rate companies
- Potential upside in either scenario: infrastructure companies, cash repatriation companies, defence, gun manufacturers
ANDREW SHEETS, STRATEGIST, MORGAN STANLEY
Infrastructure spending: "In a rare example of bipartisan support, both candidates have discussed the need to repair crumbling infrastructure... The correlation between infrastructure spending and equity returns has deteriorated in recent years, but candidates' outsized plans could still be a tailwind for infrastructure-levered stocks."
Names "overweight"-rated Eaton Corp (ETN.N) and "equal-weight"-rated Pentair (PNR.N) preferred plays, given both companies' leverage to infrastructure investments and attractive relative valuation.
Utilities and clean energy sector: "Hillary Clinton has been an outspoken advocate of renewable energy and improving resiliency of the electric grid, while Donald Trump has made numerous statements in support of fossil fuels. We see a Trump presidency as largely maintaining the current level of utility infrastructure spend, while a Clinton presidency could result in meaningful upside, particularly in clean energy. Thus, from the standpoint of long-term growth, we see a positive risk/reward for utilities going into the election."
TONY DWYER, EQUITY STRATEGIST, CANACCORD GENUITY
Market moves: "In this presidential election, there is no social mandate coming from economic dislocation, nor a likelihood of any party receiving a super majority that would cause major legislative change. As a result, any election-based (market) movement – before and after – should prove temporary. Clearly, there is a lot of rhetoric, but that does not equal legislative success."
SEAN DARBY, CHIEF GLOBAL EQUITY STRATEGISTS, JEFFERIES
Global markets: "We analysed equity returns before and after the U.S. election. The Hang Seng tends to do well one month before the election and then performs till the end of the year. The Nikkei 225 tends to do well one month afterwards. Interestingly, the VIX consistently rises one and three months before the election while the dollar tends to strengthen. Bonds tend to do better after the election result going into the year-end."
ROB MARTIN, SENIOR U.S. ECONOMIST, BARCLAYS CAPITAL
Clinton win: "If elected, we believe that Hillary Clinton would push for expanded trade deals, including a revised or modified TPP-like agreement, albeit these deals would likely include increased protections for US workers, as well as expanded provisions for trade adjustment assistance."
Trump win: "Donald Trump, if elected, is likely to actively oppose any expansion of trade, and he plans to withdraw from TPP, direct the Secretary of Commerce and Treasury to identify violations of trade agreements and unfair trade practices, renegotiate NAFTA, and 'use every lawful presidential power to remedy trade disputes'."
CHRIS KRUEGER, COWEN WASHINGTON RESEARCH GROUP, COWEN AND COMPANY
Trump win (GOP Sweep): Positive for consumer discretionary, energy, industrials, IT, telecom and materials sectors; negative for healthcare; neutral for consumer staples, financials and utilities
Clinton win with GOP House: Positive for industrials, IT, materials and utilities sectors; negative for energy and telecom sectors; neutral for consumer discretionary and staples, financials and healthcare
Clinton win with a Democratic House: Positive for industrials, IT and materials sectors; negative for energy, financials, health care and telecom sectors; neutral for consumer discretionary and staples, and utilities
(Compiled by Tenzin Pema and Geetha Panchaksharam in Bengaluru Newsroom; Editing by Dan Burns)