4 Stocks To Consider In The Run-Up To The U.S. Presidential Election

Market conditions are improving following Wall Street’s negative reaction to July’s softer-than-expected labor market results. Traders had quickly signaled the likelihood of a near-term recession following results that showed labor market activity is starting to decline, and unemployment is on the rise.

On the back of this, the market expects the Federal Reserve to begin cutting interest rates in its upcoming meeting in September. In July, the Consumer Price Index (CPI) dipped to 2.9%, a decline from 3% a month earlier, and the lowest since March 2021.

Monetary tightening has worked, but many are raising concerns that the Fed's “higher for longer” strategy has kept interest rates at an unsustainable level, and could lead to near-term recessionary pressure.

However, with an upcoming presidential election less than four months away, investors are beginning to pencil in several stock options that could help them stick out any uncertainty and bring a smoother market transition as a new candidate is expected to take the top seat in the White House.

As presidential hopefuls begin to launch their campaigns across the country, and many address hot-button issues, the turnaround could make for a compelling time to start considering a handful of stocks that could provide investors with much-needed upside.

However, investors could be dealing with more than market uncertainty. ExpressVPN in their recent report highlighted how the rapid advancements in artificial intelligence (AI) have seen a huge rise in the spread of misinformation, including thousands of fake social media accounts aimed at skewing political narratives. This could not only influence voter opinions but further impact investor confidence in the near term.

Fox Corporation

The upcoming presidential election will be a history-making event, and Fox Corporations (NASDAQ: FOX) will be at the forefront of delivering campaign and election results to millions of viewers and voters across the country.

Not only will millions be tuned in to watch as the race unfolds, but the company is set to benefit from the increased campaign ad spending. Current ad spending is projected to rise by 30% this year compared to 2020, with total spending toppling more than $12.32 billion in 2024, according to a report cited by Reuters from Insider Intelligence.

More than this, the majority of ad spending will be centered around traditional media, most of which includes televisions, which accounts for 71.9% of all spending, representing an increase of 7.9% compared to 2020.

This year has already been plenty successful for Fox following the company’s Q4 2024 fiscal results. Fox reported quarterly revenues of $3.09 billion, an increase of $60 million or roughly 2% compared to the same period last year. Revenue growth was primarily driven by an increase in affiliate revenue fees and cable network programming.

In total, the company has reported full-year revenues of $13.95 billion, a decline from the $14.91 billion reported last year. Fox had reported that lower spending in midterm advertising in the prior year, along with the absence of big-ticket events such as Super Bowl LVII and the Fifa Men’s World Cup on Fox Sports had resulted in lower-than-expected revenue.

However, the upcoming elections could be a turning point, giving the stock another significant boost. Stocks have already risen more than 30% since the turn of the year, and are currently trading 18.55% above the same period of last year.

Exxon Mobil Corporation

Investors have been closely monitoring the presidential candidate’s position regarding fossil fuels, including natural gas and oil extraction. Former republican president Donald Trump introduced the “America First Energy Plan” during his previous campaign, and shortly after taking office, his administration implemented his ambitious plans.

How the upcoming election results will benefit the energy sector remains a mystery, however, Exxon Mobil (NYSE: XOM) could be in a position to benefit from improved energy development support on federal land, including oil and gas drilling.

More than this, Exxon has largely seen improved activity, according to its Q2 2024 financial results. The oil company had announced total earnings of $9.2 billion, or $2.14 per share. Additionally, company cash flow from operating activities had remained steady at $10.6 billion.

Additionally, the company had reported the highest quarterly production from low-cost-of-supply assets. Elsewhere, product sales improved by 10%, compared to the first half of the year, while the company managed to close the merger with Pioneer five months faster than similar transactions.

The closing of the merger could significantly help boost the company’s upstream portfolio, adding $500 million to earnings in the first two months post-merger. The merger between the two companies will help Exxon gain a significant upper hand in the Permian Basin, a key extraction site for the energy giant.

Despite fluctuating oil prices, rising demand for energy remains a critical factor for XOM. This year, company stocks have gained over 16% and are currently trading 2.25% below its 52-week peak.

Lockheed Martin Corporation

Political tension in the Middle East and the ongoing war between Russia and Ukraine have sent defense stocks soaring in recent months, and investors are keeping a close watch on what the next U.S. presidential election will bring for the country’s defense industry that has largely benefited from international conflict.

Despite the increased activity, Lockheed Martin (NYSE: LMT) had come to face multiple challenges in recent months, which in turn had resulted in muted gains on the stock market, and investors losing confidence in the company’s abilities.

For instance, the company earlier announced a delay in delivery of its key F-35 fighter jets following technical issues and new upgrades the company had introduced to the iconic fleet. Long before this, Lockheed had been struggling to maintain a positive profit margin, and although government spending had significantly increased, higher material and labor costs had largely eaten into the company’s profits.

However, there may be some light at the end of the tunnel. Second quarter financial results were better than expected, with a total net sales of $18.1 billion, which was an increase of 9% year-over-year. Additionally, free cash flow of $1.5 billion was a strong improvement of the reported $700 million for the same quarter in 2023.

Lockheed is currently sitting with over $46 billion in government contract obligations, the largest in the industry, and far outpacing the company’s nearest competitors, including RTX (NYSE: RTX) and General Dynamics (NYSE: GD).

Aside from government contracting, the company is rapidly expanding its aerospace portfolio through the acquisition of struggling satellite developer Terran Orbital. Lockheed already had a 28% stake in the company back in 2017, though the recent acquisition has further solidified Lockheed’s position to expand its aerospace operations and further diversify its service offerings.

Northrop Grumman Corporation

Investors are calling Northrop Grumman (NYSE: NOC) an undervalued stock option. Multiple factors play into this decision, however, many investors have seen strong returns with Northrop, with some even reporting a 46% gain in the last three years.

Similar to other aerospace and defense companies, Northrop has close relations with the U.S. government, with a large percentage of their income generated through government contracting.

Though Northrop, Lockheed, and Boeing (NYSE: BA) were among several contractors that lost more than $30 billion in government contracts this year, the company continues to deliver upside results that provide them with significant market leverage.

For instance, in March this year, the company was awarded a $178 million contract by the U.S. Navy to expand the Northrop Allegany Ballistics Laboratory in West Virginia. Government contracting in the defense sector has become a revolving door for the company, and investors are positive that this is a position the company could keep regardless of who takes office at the White House.

The second quarter showed strong improvement for the company, with a total of $1.5 billion in net awards, and a 7% improvement in net sales growing to $10.2 billion. Additionally, operating income performed well due to better cost efficiencies and improved 13%. Free cash flow was up by 80% to $1.1 billion, and the company has raised its 2024 guidelines.

Since the last trading week of July, company stocks have advanced by nearly 15%, while on a year-to-date basis, NOC has gained 7.72%. Performance is 3% above its former peak of November 2023, with analysts expecting further gains in the coming months.

How Do Elections Influence Stock Markets?

A presidential election is one of the biggest market-moving events for any investor. Change in leadership and political control can bring new opportunities and challenges for investors, though the lead-up to the election provides investors with near-term uncertainty about what to expect.

This year has already seen investors come face to face with a series of unexpected events that have shaped the course of the market, and the upcoming U.S. presidential election will be another thorn in the side of investors. 

Typically, equity markets remain steady in the months leading up to an election, as suggested by data from previous election years. For instance, an analysis by Morgan Stanely showed that the stock market delivered positive performance during the presidential election years between 1928 and 2016.

Furthermore, the analysis showed that the victory of a Republican candidate resulted in an average 15.3% gain for the S&P 500, while a Democratic win usually leads to a 7.6% improvement on the benchmark.

There are plenty of reports that suggest patterns between election years and the stock market, however, many experts have agreed that economic activity such as interest rates, employment, and inflation remains among the most important key factors that can lead to market fluctuations.

Will The 2024 Election Influence The Stock Market?

Stock markets are multi-dimensional, and often investors have to take into consideration that various moving parts can have an impact on the performance of their portfolio and holdings. However, an election year and the months leading up to the day when voters can cast their ballots remains an important period for investors.

Typically, investors can begin speculating which candidate is most likely to end up in the White House, but more than this, which party will control the majority of the Senate and Congress?

Investors also consider each candidate's campaign policies. Changes in domestic policies and international trade relations can have an impact on how investors' portfolios perform in the medium to long term.

For instance, during the 2020 presidential election, candidates on both sides of the aisle were focused on hot-button issues such as healthcare, the pandemic and economic stimulus.

Though presidential campaigning can reflect on the broader market, an analysis of the past 75 years has shown that patterns often repeat themselves during election cycles, according to analysts from U.S. Bank.

Again, this analysis has pointed out that there is typically minimal impact on the financial market performance in the long run, and that returns are more sensitive to economic trends than election results.

However, this does not ignore the importance of an election and how election results can shape economic and market activity for the length of a candidate's presidency. Though it’s hard to speculate which candidate will take the office this year, investors will need to keep an open mind approach in the run-up to the election, seeking safer and more recession-buoyant stocks.

Wrapping Up

Wall Street remains fixated on the possibility of near-term interest rate cuts, as inflation continues to make a downward trend towards the Federal Reserve’s 2% target rate. However, traders are already beginning to price in the U.S. presidential election, and the possibility of another Trump Presidency.

Investors are considering the impact a change in political power will have on the stock market should the Democrats lose office this November. Analysis of historical data showed that markets tend to perform better after a Republican victory, but could this be the case in the upcoming election?

With a lot of uncertainty ahead, and having already come face-to-face with a series of challenges this year, the presidential election could perhaps be the final straw in the camel's back for investors this year.