Financial markets are preparing for possible shifts in sectors such as technology, finance and energy, as the US presidential election draws near.
Analysts closely monitor candidates’ policies regarding banking regulation, technology industry oversight, environmental agendas and other factors that could influence investor sentiment.
Investors have historically weighed the regulatory risks of certain sectors with their optimism about certain sectors.
The key sectors for the upcoming elections
Financial and technology sectors are especially sensitive to the outcome of elections. Tighter banking regulations could, for example, limit profitability under a new administration, putting pressure on financial stocks.
As Donald Trump’s 2016 pro-deregulation stance showed, a relaxed policy may also encourage risk-taking and sector growth.
Tech stocks also respond to regulatory policies, with tighter regulations weighing on tech giants such as Apple and Google while more lenient approaches boost their growth prospects.
Volatility is a key indicator for investor expectations
The VIX (fear index) often spikes during election season as investors navigate uncertain political environments.
The VIX rose by 38% in 2020 leading up to the US elections, reflecting anxiety over different scenarios.
This volatility does not always mean losses, but it highlights the need for caution when dealing with potential market shifts.
Gold, a safe-haven asset, tends to rise in value during political upheavals.
Adapting investment strategies to the post-election market outlook
After an election, the markets adjust to reflect the policies of the newly-elected administration. Construction and energy stocks often rise when the results are positive for business, while green policies increase interest in renewables.
Joe Biden’s climate agenda, for example, accelerated the growth of renewable stocks such as First Solar.
Investor strategies adapt to the government’s stimulus expectations. For example, Barack Obama’s economic recovery plans of 2009 boosted growth in the finance and consumer sector.
The post How the US Election could shake up the finance, tech and energy sectors will be updated as new information becomes available.
