Voters will soon head to the polls to elect the next U.S. president in what could end up being the closest presidential election ever. The next president and Congress will implement a new regulatory regime and laws that could influence the stock market and many sectors. I would imagine that most investors have been positioning their portfolios to benefit from who they think will win, as well as hedging the victory of another candidate. Here is one exchange-traded fund (ETF) and cryptocurrency to buy if former President Donald Trump triumphs on election night and two stocks to buy if Kamala Harris wins.
If Trump wins...
If Trump wins, I would look at bank stocks. While bank regulation is not the focus of this election, President Joe Biden's administration has been very punitive to the banking sector. Part of this is likely due to several unchecked bank runs in 2023 that led to a spate bank failures at some of the fastest speeds ever. Many believe some banking regulators were slow to act, which might have heightened their sense of urgency during the last year.
But even before that, regulators during this administration have significantly slowed down approval times on bank mergers and acquisitions, forcing some large banks to call off mergers and others to contemplate whether pursuing mergers and acquisitions (M&A) is worth it. Even smaller deals between banks and fintechs struggled to receive approval in a timely manner and a number of mergers were called off. Bank M&A is a catalyst for the sector, so a Trump presidency may well open the floodgates.
Additionally, Trump has loosened regulations on the banking sector before, so there's plenty of reason to believe he might again, or at the very least not dramatically change current bank regulation. One way to get exposure to banks is to buy the SPDR S&P Regional Banking ETF(NYSEMKT: KRE). The chart below shows what happened to the ETF after Trump got elected in 2016.
The other sector I would look at is crypto, more specifically Bitcoin(CRYPTO: BTC). Bitcoin has rallied in recent months, partly on the prospects of a Trump victory. A Trump administration would likely be more favorable for crypto regulation. Trump has previously floated the idea of firing Gary Gensler, who heads the Securities and Exchange Commission (SEC). Crypto holders don't view Gensler as a friend. Gensler has on numerous occasions suggested that most cryptocurrencies should be regulated by the SEC, which would likely lead to stricter actions against digital assets.
Trump also might advocate for policies that clear up some of the gray areas for crypto. Trump has expressed support for Bitcoin miners and may make it easier for banks to hold some digital assets or work more with blockchain networks.
If Harris Wins...
If Harris wins, I would look at homebuilder stocks and electric vehicles, sectors the vice president has expressed support for. On the campaign trail, Harris has pushed policies to help solve the housing crunch in the U.S., including building more homes and providing financial assistance to first-time homebuyers.
Harris has specifically proposed building 3 million new homes through tax breaks for homebuilders that prioritize dwellings suited for first-time homebuyers, while also offering incentives for companies to build rental units. Harris also proposed providing as much as $40 billion to incentivize local governments to eliminate zoning that restricts new housing above a certain supply and discussed providing $25,000 in downpayment assistance to first-time homebuyers. I don't know which policies both Democrats and Republicans can get behind these days, but I could see housing gaining traction. After all, high home and rent prices have been a big driver of inflation, which doesn't benefit anyone.
One stock to ride the momentum would be D.R. Horton(NYSE: DHI), the country's largest homebuilder by volume since 2002. D.R. Horton also builds homes specifically aimed at affordability and first-time homebuyers, so it would be positioned to expand this focus if it's more profitable for the company.
Harris is also viewed as a more favorable candidate for electric vehicles and is expected to continue Biden's advocacy for the industry. Biden's Inflation Reduction Act granted $7,500 tax credits to people who purchased electric vehicles made in North America. Trump has proposed ending these tax credits. Some believe Harris will also continue investing in electric vehicle charging infrastructure. If Harris is elected, I would expect the California-based electric-vehicle maker Rivian(NASDAQ: RIVN) to benefit.
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Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and D.R. Horton. The Motley Fool has a disclosure policy.
