“Trump vs. Harris: Harmless and not-so-harmless bets “deeply

It is part of analyst folklore to draw up stock rankings in the run-up to political elections in the USA. Which companies will benefit from the election victory of one candidate and which from the election victory of the other? This is also the case in the upcoming US presidential election. Ali Masarwah, fund analyst and managing director of the financial services provider envestor, weighs up the pros and cons of such race lists.

4 November, 2024 FRANKFURT (envestor). Several brokerage houses have published their “Harris” and “Trump” favorites lists. Which companies would benefit from a continuation of “Bidenomics”, which from a Trump tariff regime? Is it a good idea to include such race lists in your portfolio? At first, the skeptic in me screams: “Tactical trading! No, no, no, don't do it!” This reflex is justifiable, not necessarily because political stock markets have short legs, but because racing lists have the character of horse bets. Anyone who gets involved is gambling, and that does not speak for good investor returns. Gamblers are after short-term profits, and that often doesn't work because the direction of share prices cannot be reliably predicted in the short term. When brokerage firms recommend individual “Trump” and “Harris” stocks, they are trading lemons. At worst, investors swap funds or ETFs, in which they actually wanted to invest for the long term, for dubious bets.

On the other hand, when I looked through the race lists, I noticed that they are predominantly broadly diversified baskets of shares. Anyone who isn't betting on cryptos and isn't taking part in the candidate lottery on obscure online betting platforms is unlikely to be speculating for house and home. This is because most of the recommendation lists are standard stocks that are included in broad market indices such as the S&P 500 or MSCI USA. Anyone who has not previously invested in equities and buys a broadly diversified basket of shares on the occasion of the US election will not go wrong in the long term. All in all, I would regard the question of stock rankings as a harmless gimmick.

However, there is nothing playful about the current situation on the bond market. Yields on US bonds have risen by over 0.6 points in recent weeks. That is a correction. Investors apparently fear that both candidates would pursue a reckless fiscal policy. Both a Trump and a Harris administration would lead to rising government deficits. These still vague concerns could at some point call into question the trustworthiness of US government bonds as a safe haven. This is a scenario that is hard to imagine - and one against which stock race lists are harmless spinning.