What a Donald Trump or Kamala Harris win will mean for your investments

The performance of stocks, Big Tech, gold, oil, bonds and cryptocurrency will be affected by who is in the White House

The potential shift in power has investors reassessing the Trump Trade. Getty / Nick Donaldson

Geopolitical developments always weigh on markets and the biggest news in the past two weeks has been US President Joe Biden making way for Vice President Kamala Harris as the Democratic Party’s most likely candidate for the November election.

The markets were upended by this announcement after assuming that Republican Donald Trump would be re-elected to a second term as US president.

“The potential shift in power has investors reassessing the much-debated Trump Trade,” says Althea Spinozzi, head of fixed income strategy at Saxo Bank.

“The Trump Trade suggests that certain sectors of the US economy, such as banking, industrials and energy, would benefit from deregulation and tax cuts. Bitcoin is favoured, while fixed income, especially US Treasuries, appears less attractive due to expected fiscal spending and the resulting upwards pressure on bond yields.”

The National spoke to experts to understand which market segments would benefit in 2025 after a Democratic or Republican wins the presidency and how it would impact the average retail investor.

Likely market reactions

Mr Trump’s policies generally focus on tax cuts, deregulation and a pro-business stance. This could lead to a favourable environment for businesses, potentially driving up stock prices and benefiting investors, according to Laith Khalaf, head of investment analysis at investment platform AJ Bell.

“Markets have previously reacted positively to Trump’s economic policies, especially in sectors like energy, finance and manufacturing,” he says.

“However, trade policies, particularly with China, could create uncertainties. There may be an initial surge in the stock market due to anticipated tax cuts and deregulation, so investors might see a short-term boost in their portfolios.”

Ms Harris is a bit more of an unknown, and as a Democrat she might be expected to focus on increasing corporate taxes, regulating Big Tech and emphasising green energy and healthcare reforms, Mr Khalaf reckons.

These changes could create headwinds for certain sectors but benefit others. Markets might initially react with caution due to potential increases in corporate taxes and more stringent regulations, but they may also welcome the stability provided by a more predictable president than Mr Trump, he says.

Investors might see gains in sectors such as defence, property and small caps, reflecting Mr Trump’s supportive policies and personal interests, a Saxo Bank representative estimates.

However, Mr Trump’s presidency could also bring increased market volatility due to unpredictable policy announcements and potential geopolitical tensions.

Conversely, a Harris victory may shift focus towards social programmes and regulatory oversight, potentially impacting corporate profit dynamics and market behaviour, according to Saxo Bank.

Initial volatility could arise from policy transitions and regulatory changes but stability may follow as Ms Harris’s policies become clearer and more established, the Danish bank adds.

Mark Chahwan, chief executive and co-founder of UAE investment platform Sarwa, meanwhile, says that regardless of who wins, historical data shows no consistent impact of elections on stock market performance.

“Therefore, maintaining a diversified portfolio remains key,” he says.

“While many are surprised that Democrats historically have seen better market performance, this is largely random and influenced by numerous factors beyond just who is in office.”

Similarly, Bret Kenwell, US investment analyst at eToro, says US stocks rely more on earnings and fiscal policy from the Federal Reserve than who is in the White House.

As long as earnings and the economy continue to hum along, stocks can, too, regardless of who wins the election, he adds.

Which asset classes will benefit?

Historically, stock markets tend to perform well in the first year of a Democratic presidency, according to Saxo Bank’s Ms Spinozzi.

Major indexes such as the Russell 2000 and Nasdaq often show stronger gains. Given the current high levels of indexes like the Nasdaq and S&P, a continuation of positive performance can be expected, especially if fiscal stimulus measures are implemented for lower-income earners, she says.

Increased military spending and favourable policies for real estate, aligned with Mr Trump's personal interests, could drive growth in these industries, Saxo Bank forecasts. Small businesses might also see advantages from tax cuts and deregulation.

In contrast, a Ms Harris administration could enhance prospects for clean energy, health care and technology sectors, according to the lender.

“Democrats in the White House could bolster sectors such as health care, technology and renewable energy, maintaining their recent gains. Republicans would favour banking, industrial and energy sectors, driven by deregulation and fiscal policies conducive to these industries,” says Saxo Bank’s Ms Spinozzi.

“Gold often performs well, regardless of the president’s party, but significant peaks are observed during Republican presidencies due to economic uncertainty and geopolitical tensions. Democratic presidencies generally see more stable or declining gold prices as economic stability improves.

“Bond markets generally remain stable under both parties, showing neither consistent gains nor losses directly tied to the president's party. Safe-haven demand and economic policies significantly influence performance.”

WTI crude oil might see significant gains under Mr Trump. Republican policies often favour fossil fuel industries, leading to increased production and possibly higher prices driven by reduced regulation and support for domestic oil production, she says.

Under Mr Trump, traditional energy sectors such as oil and gas could benefit from deregulation and favourable policies, as could the crypto industry, Mr Khalaf forecasts.

Green industries will be hoping for a Democrat win as they are likely to find life easier under Ms Harris than Mr Trump, he says.

“Policy from the White House is one matter, but how easily an administration can get those proposals through Congress is another. At times, the government can play a notable role, particularly when it involves tariffs, reshoring efforts or energy policy. But most of the time, it will boil down to industry and macro fundamentals that steer the ship for each sector,” eToro’s Mr Kenwell says.

“In reality, the sectors that perform well down the stretch will be the ones with solid fundamentals.”

Whose presidency could result in more volatility?

Historical patterns suggest that while Mr Trump’s policies can boost market confidence, his unpredictable trade policies and international relations could lead to significant market volatility, according to Mr Khalaf.

Ms Harris's presidency might introduce short-term volatility due to uncertainties around new policies and regulation, he says.

“It’s hard to predict market reaction with any accuracy and this is something investors shouldn’t try to second-guess,” Mr Khalaf warns.

Both Mr Trump and Ms Harris could introduce different forms of volatility, but market movements are driven by many factors beyond presidential actions, Sarwa’s Mr Chahwan explains.

Historically, election-related volatility is short-lived, he adds.

“We’ve seen a recent uptick in volatility that’s coincided with a switch in Democratic candidates, and it’s possible that volatility could remain elevated into the election,” according to eToro’s Mr Kenwell.

“But remember, markets are forward looking and once the election is decided in November, it should begin to price in that outcome quite quickly. A notable deterioration in the jobs market would be a bigger, more volatile issue than who’s elected as the next president – at least in the market’s eyes.”

What strategies should investors adopt?

Investors should maintain a well-diversified portfolio to mitigate risks associated with market volatility and invest in companies with strong fundamentals that are likely to perform well regardless of political changes, Mr Khalaf recommends.

Most investors will have an investment horizon which extends far beyond the forthcoming presidential term and so should focus on the long term and try to block out short-term noise, which will be plentiful, he suggests.

“Most investors would do best by tuning out the noise and focusing on the market fundamentals, such as interest rate policy, S&P 500 earnings growth and the labour market – not the barrage of political headlines we’ll see between now and the election,” Mr Kenwell says.

Investors must stay informed. A key point is to be aware of what aspects of the election can cause volatility and how to navigate it, according to Saxo Bank.

They need to adjust portfolios to align with sectors and regions that may benefit from either candidate's policies and adjust commodities exposure based on expected policy impacts, the lender suggests.

Evaluate currency positions, especially those sensitive to US policy changes, and adjust accordingly, it recommends.

Investors can diversify portfolios using exchange-traded funds or other instruments that can provide exposure to sectors less likely to be affected by the election outcomes, the bank adds.