What does a Joe Biden victory mean for election stocks? The Democratic nominee is favored to win in the Nov. 3 U.S. presidential election. While many are concerned potential policy changes could impact the markets, David Kass, a clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business, sees some positive results from a Biden administration.
In an email sent to InvestorPlace, Kass said that while Biden plans to raise taxes on corporations and high earners, “he is also planning to spend more to stimulate the economy” in the wake of the novel coronavirus. Coupled with an easing of trade tensions, Kass thinks we could see greater stability both here and abroad, which could help the stock market in the coming years.
But, while the overall economy market may thrive under a Biden administration, his policies could hurt specific segments of the economy.
Which segments? Sure, financial services and Big Tech may come first to mind when thinking of industries threatened by Biden winning the White House (subscription required). But, given how much Wall Street and Silicon Valley support Biden relative to his opponent, President Donald Trump, it may remain business as usual for these major segments of the U.S. economy.
However, while these two industries could avoid the worst of more regulation, it could be bad news for many other industries. Taking a look across all sectors, election stocks in these five may face the biggest headwinds if Biden wins the White House:
- Coal
- Cruise Lines
- Oil and Gas
- Pharmaceuticals
- Ride-Hailing
Granted, it is not all set in stone. Trump could pull off another electoral upset. But, given the big potential for shares in these industries to tumble after Nov. 3, tread carefully.
Election Stocks to Sell: Coal
Back in the era of President Barack Obama, coal companies saw their share prices plummet. Yes, part of this was due to competition from natural gas. Yet, the Obama administration’s stricter regulation of the industry had an impact as well.
Did Trump change the coal industry’s prospects? It is debatable. His administration has been more favorable to the industry. But, market factors have meant continued tough times for U.S. coal producers.
Yet, a Biden presidency would be worse news for this hard-hit industry. Back in September, analysts at Fitch said a Biden presidency would “likely accelerate the decline of coal production.” Not surprisingly, major names in this space, like Arch Resources (NYSE:ARCH) stock, Peabody Energy (NYSE:BTU) and CONSOL Coal Resources (NYSE:CCR) have tumbled in anticipation of a Biden win.
With this in mind, much of the risk may already be priced into coal stocks. Those willing to go contrarian may see near-term opportunity here. Tread carefully, as the selloff may be far from over.
Cruise Lines
Sure, the cruise industry is not exactly in Joe Biden’s crosshairs. But, his administration would mean a change in how our country is tackling the novel coronavirus pandemic. And, as one commentator discussed Oct. 28, that could mean an extension of no-sail orders through February 2021.
What does that mean for the major stocks in this space? Shares in Carnival (NYSE:CCL), Royal Caribbean (NYSE:RCL) and Norwegian (NYSE:NCLH) could fall back to their March coronavirus crash lows. Or, even lower.
Granted, the situation is worse for CCL stock than it is for the others. And, Wayne Duggan wrote for Benzinga that a Blue Wave — where Democrats win back the White House and the U.S. Senate — could mean a massive stimulus package that benefits this hard-hit industry.
However, while stimulus funds may help the industry avoid Chapter 11 bankruptcy, they may fail to help cruise stocks bounce back in the near term. Considering the pros and cons from a new administration, it is still wise to avoid these names for now.
Election Stocks to Sell: Oil and Gas
Of all the industries profiled here, this is the one most under threat from a Biden presidency. This is namely due to his remarks in the last presidential debate.
Sure, you can argue Biden’s vow to phase out the oil industry is not a new position. But, his words may further scare off investor interest in this sector. So, which stocks could see the biggest impact if the Democratic nominee wins Nov. 3?
Namely, large integrated oil firms like Exxon Mobil (NYSE:XOM) stock. Already in a bad place per InvestorPlace analyst Matt McCall, a Biden presidency could mean this hard-hit blue-chip stock falls further from current prices.
But, the potential share price decline for Exxon pales in comparison to what could happen with other oil and gas names. One company in particular, Phillips 66 Partners (NYSE:PSXP), could crater after Election Day.
How so? Back in September, I discussed how this master limited partnership (MLP) has high exposure to the Dakota Access Pipeline (DAPL). For years, activists have called for the controversial pipeline to be shut down. So far, such action has been delayed.
But, with a new administration at the helm, what has been feared may finally come to fruition. Bottom line: The specter of a Biden presidency, coupled with pandemic headwinds, mean it is wise to avoid this sector for now.
Pharmaceuticals
Fossil fuel companies may face the greatest risk from a Biden presidency. But, the much-criticized pharmaceutical industry could wind up under threat as well. Sure, even Trump has gone on the offensive against skyrocketing prescription drug prices. But, a Democratic administration may take it up a notch.
Some investors saw a Biden victory already priced into the sector, and took advantage of the sector’s heavy discount to the S&P 500. However, Wall Street may be overestimating how much business as usual the next four years could be politically.
So, which pharma stocks would take the biggest hit? Major pharma stocks like Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK) and Pfizer (NYSE:PFE) could see big declines. Biotech stocks could also see an impact. Decreased drug prices could offer less of a payoff for developing a new treatment, therapy or vaccine.
In short, with potential regulatory headwinds around the corner, plan accordingly with the pharma names in your portfolio.
Election Stocks to Sell: Ride-Hailing
Compared to the other industries listed above, this one may be a bit of a surprise. Names like Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) do not sound like election stocks at first glance. But, events playing out at the state level could pave the way for major changes on the federal level.
What am I talking about? The specter of Uber and Lyft drivers being reclassified as employees, rather than as independent contractors. California’s Assembly Bill 5 legislation made that the case in the Golden State last year.
And, while Silicon Valley-backed Proposition 22 would exempt the ride-hailing companies from this law, there is no guarantee California will vote in support of it on Nov. 3.
If Proposition 22 fails to get majority vote, and the ride-hailing industry faces big regulation in California, expect similar legislation to follow in other states. What does this have to do with Biden? The Democratic party nominee supports what is essentially AB5 on the national level.
Yes, pro-Biden Silicon Valley may be able to mitigate this risk. But, with these policies favored by Democratic party interest groups like labor unions, this may be a fight Big Tech loses.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor to InvestorPlace, has written single stock analysis since 2016.