What investors need to know after the Harris-Trump debate: Sectors to watch

The first presidential debate between Vice President Kamala Harris and former President Donald Trump took place last night at the National Constitution Center in Philadelphia. While the market response was relatively muted – given that most policies had been previously announced – some sectors did see some movement, particularly in the crypto space.

 

Crypto holders, in particular, expressed disappointment as neither candidate addressed the issue of cryptocurrency regulation, which had been a point of interest. Trump's known support for making the US a crypto powerhouse and Harris' softened stance made the lack of crypto discussion notable, leading to a slight drop in Bitcoin’s price following the debate.

 

While no significant new policies were announced, the debate provided insights into what each candidate's administration might focus on in the future. Kamala Harris positioned herself as a champion for middle-class families, proposing the extension of the child tax credit and a $50,000 tax deduction for small business startups. Her economic policy largely revolves around supporting small businesses and middle-income earners, which contrasts with Trump's approach, which she claims benefits billionaires and large corporations through substantial tax cuts.

 

Trump, on the other hand, emphasised his ongoing trade war strategy, mainly targeting China. He reiterated plans to impose tariffs on imports to protect US domestic production, a move aimed at curbing the trade deficit. However, as economists have pointed out, such a policy could lead to higher inflation in the short term, with the increased costs of tariffs potentially passed on to consumers. This inflationary pressure could have ripple effects on various sectors, including retail and manufacturing.

 

Harris also addressed the issue of affordable housing, proposing tax credits and down payment assistance for first-time homebuyers. This kind of policy has been tried in the UK, which led to a surge in housing prices, though it didn't necessarily result in more homes being built.

Housing Market Impact

Several housing and real estate companies could benefit from Harris' proposed policies. Builders like Lennar Corporation and D.R. Horton, two of the largest homebuilders in the U.S., could see increased demand for new homes if more first-time buyers enter the market. Additionally, real estate investment trusts (REITs) like Equity Residential could see a positive impact as housing demand strengthens.

 

Harris's proposals on healthcare are also critical to her platform. She aims to expand the Affordable Care Act (ACA), protect pre-existing conditions, and allow Medicare to negotiate drug prices, which could significantly affect the healthcare sector.

Healthcare Sector Impact

Healthcare companies that deal with Medicare, such as UnitedHealth Group and Humana, could be positively or negatively affected depending on policy implementation. Drug manufacturers like Pfizer and Merck may face pressure due to Medicare's ability to negotiate drug prices, potentially lowering their revenue from government contracts. However, companies that provide lower-cost drugs or alternatives might see increased demand if patients and providers seek more affordable treatments.

 

Harris also reiterated her stance on clean energy investments. The US government has supported significant companies like Tesla through tax breaks, boosting the electric vehicle (EV) market. Harris plans to continue supporting clean energy but has also expressed support for increasing domestic gas production, which could influence voting in swing states like Texas and Pennsylvania​with solid fossil fuel industries.

Tesla and Domestic Gas Production

Tesla has benefited significantly from US tax breaks and incentives for clean energy. For example, Tesla received around $1.5 billion in environmental regulatory credits in 2021, which boosted its profitability. Continuing such policies under a Harris administration would further benefit companies like Tesla. However, Harris' support for domestic gas production signals a balancing act to appeal to voters in swing states like Pennsylvania and Texas. If policies favour fossil fuel exploration in those areas, gas producers like ExxonMobil and Chevron could benefit from increased domestic gas production.

 

On the other side, Trump has remained consistent with his opposition to clean energy initiatives like wind and solar, preferring to focus on fossil fuels and fracking. He has criticised wind and solar as inefficient and wants to boost fossil fuel production for energy independence.

Energy Sector Impact

If Trump were to return to office, his energy policies could negatively impact wind and solar power companies, such as NextEra Energy and First Solar. These companies have thrived under government support for renewable energy but could face headwinds under a Trump administration. On the other hand, fossil fuel companies like Halliburton, which provides services for fracking, and Occidental Petroleum could benefit from a resurgence in US oil and gas production.

 

Trump's proposed immigration policies, which involve large-scale deportations and increased use of local police and military forces, could also impact private companies involved in security and border management. Companies such as GEO Group, which operates private detention centres, and CoreCivic, a principal private prison contractor, could see increased demand for their services.

 

Lastly, Trump's focus on reducing the trade deficit with China through tariffs could profoundly affect the US dollar. If tariffs are increased significantly, it could strengthen the dollar in the short term as imports become more expensive. However, the long-term effects might lead to inflation, weakening the dollar if consumer spending slows and prices rise.

 

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