Bank of America Report: The impact of the US presidential election on US stocks will not be significant!
A report from Bank of America pointed out that the impact of the November presidential election on US stocks is limited, and investors should focus on profit growth rather than party control. Strategist Savita Subramanian emphasized that historically, policy impacts have been contrary to expectations, with traditional energy stocks performing well during Biden's tenure while clean energy stocks declined. It is expected that regardless of the election outcome, US stocks will rise by 2025, with the S&P 500 index's earnings per share expected to grow by 13% next year
Bank of America stated that the outcome of the November presidential election in the United States is expected to have little impact on the direction of the US stock market.
Bank of America strategist Savita Subramanian mentioned in a report last Friday that the stock market rarely cares about which party controls the White House. Instead, investors should focus on earnings growth. Subramanian said, "Profit acceleration is far more important than who sits in the Oval Office."
Furthermore, targeted policies enacted by lawmakers on Capitol Hill often have the opposite effect on an industry's actual performance compared to investors' expectations.
For example, when Trump took office as president in 2017, energy stocks were seen as potential beneficiaries due to his favorable stance on oil drilling, while renewable energy stocks were seen as potential losers.
However, during Trump's presidency, the energy sector performed the worst, falling by 29%, while the S&P 500 index rose by 83% during the same period. Meanwhile, according to data from YCharts, the clean energy sector rose by 306% during Trump's presidency.
When Biden assumed the US presidency in 2021, many investors believed that traditional energy companies might be the losers as Democrats are typically unfriendly towards oil companies, while clean energy stocks were seen as potential winners.
Now, the situation is quite the opposite: traditional energy stocks performed the best during Biden's presidency, rising by 139%, while the clean energy sector was the worst-performing industry, falling by about 55%. Subramanian said, "Even targeted policies sometimes produce results opposite to expectations, with many subtle differences."
Subramanian stated that this time is no exception, and investors' perceptions of the impact of the presidential election results on the stock market may once again prove to be wrong.
For example, while full Republican control of the White House and Congress may be seen as favorable for Tesla stock because CEO Musk has shown warm welcome to Trump and the Republican Party, this could be negative as electric vehicle tax credits may face risks.
Ultimately, Subramanian and her team expect that regardless of who wins the November election, US stocks will rise by 2025. She forecasts a 13% year-over-year growth in earnings per share for the S&P 500 index next year, with profit growth historically being the biggest driver of stock market gains. Subramanian summarized by saying:
"Corporate profits are more important than politics."