Below you will find a list of companies that have had the highest percentage gains and losses since the U.S. presidential election, which occured on November 3rd, 2020. Learn more.
As an investor you know that the market doesn’t really care which party occupies 1600 Pennsylvania Avenue. There’s money to make either way.
But that doesn’t mean that investors can afford to take a “set it and forget it” approach to their portfolio. Elections have consequences. From tax policy and monetary policy to energy policy there will likely be significant differences in the public policy of the United States.
On election night, the narrative was that, although Joe Biden was likely to claim the White House, the “Blue Wave” that was being forecast looked to have fizzled out at sea. The basic premise of that still stands (Republicans did gain seats in the House of Representatives). However, investors will still have to wait on the outcome of two senate races in Georgia to have a clear picture of how progressive of an agenda the Biden-Harris administration may be able to push forward.
And the novel coronavirus continues to dominate the headlines. And investors are clearly getting anxious about the pace, and the scope, of lockdown measures throughout the United States and Europe. Yet, the tantalizing promise of one (or more) Covid-19 vaccines is giving the markets a sense of real optimism.
Things are changing fast, and that’s likely to continue into 2021. Whether you’re an optimist or a pessimist, you should take this time to take a realistic look at your portfolio. With that in mind, let’s take a look at how the election may affect different market sectors.
Vaccine Stocks Will Remain Volatile
On November 9, Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) announced that the partnership’s Covid-19 vaccine candidate had achieved over 90% effectiveness in its Phase 3 trial. A week later, Moderna (NASDAQ:MRNA) announced a 95% effectiveness rate for its vaccine candidate. And it appears that AstraZeneca (NASDAQ:AZN) and Johnson & Johnson (NYSE:JNJ) may not be far behind.
Does this mean the race is over? Not quite. The Biden administration has stated that “defeating” the virus is its top priority. That means that vaccine stocks are likely to remain the object of investors’ eyes.
Plus, the devil of the vaccine will be in the details. The Pfizer and Moderna vaccines are based on mRNA technology. I’m not downplaying this. It’s actually really exciting. However, it’s also unproven outside of the clinical trials. Vaccines like Johnson & Johnson are of the more “tried and true” variety that the world is familiar with. But those vaccines have also been rejected by those in the anti-vaccine movement. Maybe it’s time for a different approach?
The good news is that it appears public opinion is changing. But distributing the vaccine will take some time. And during that time, experts on the subject say there may be many more Covid-19 vaccines. However when considering which vaccine stocks to buy you still need to be selective. Right now, companies like Novavax (NASDAQ:NVAX) and Inovio (NASDAQ:INO), while showcasing interesting approaches, are lagging behind in getting vaccine approvals. This makes them highly speculative, but for the risk tolerant investors they may be worth a small position.
And what about therapeutics? Even with a vaccine, there will be a need to treat individuals who have acute and life-threatening symptoms. President Trump became the poster child for Regeneron (NASDAQ:REGN). But there are other therapeutic treatments that are in development. Eli Lilly (NYSE:LLY) has already sought out an emergency use authorization for its treatment. And if you’re looking for a dark horse candidate, keep an eye on Humanigen.
Electric Vehicle Stocks Will Remain Supercharged
If there is one segment of the market that you could say was in a bubble in 2020, it’s been the electric vehicle (EV) sector. Multiple companies have become publicly traded via a special purpose acquisition company (SPAC). This is a perfectly legal way for companies to publicly trade. However, let the buyer beware.
Investors are still trying to digest how seriously to look at the accounting issues with Nikola (NASDAQ:NKLA). And even the companies with pristine (for now) balance sheets, there won’t be products until 2022. That’s a long time for companies to go along without revenue, or profit.
But that shouldn’t steer you away from the sector. You should however not pay tomorrow’s prices for what the stock may be worth today. Companies like Fisker (NYSE:FSR) and Workhorse (NASDAQ:WKHS) have seen their respective stocks climb and crash.
The electric vehicle sector was growing even without the overt endorsement of the Trump administration. With the full-throated support of a Biden administration, you can expect EV stocks to be among the hottest sectors in 2021 and beyond.
Don’t Let Energy Stocks Wear You Out
Energy stocks came into sharp focus as concerns were raised about what a Biden victory would mean for the energy sector. The knee-jerk reaction is oil stocks down, renewable energy stocks up. The reality will probably be less black-and-white.
For example, companies like SunPower (NASDAQ:SPWR) surged higher after the election, but corrected when investors digested that a GOP majority in the Senate will likely keep the administration in check. And those that follow the energy sector know that some companies associated with fossil fuels are also helping to lead the renewable energy charge, and have the bandwidth to make change happen.
The bottom line for this sector is that you should stay tuned. A move towards more extreme mitigation techniques to control the virus will likely be a larger catalyst for energy prices in the short term.
Invest In the Right Tech Stocks
Technology stocks have been extremely volatile this year. After tumbling along with the broader market in March, many tech stocks staged a strong rally. And there was a good reason for that. Staying connected was never more important – whether for remote learning, work-from-anywhere or heightened e-commerce activity.
And then there’s social media activity. You’ll have to decide for yourself on how you see regulation going. I’m not optimistic but I think the business model for many social media companies is built on shifting sand.
Some of the areas of tech that I would be looking at are: 5G, cybersecurity, financial technology, artificial intelligence, cloud computing, and even cryptocurrency. These are big picture themes that are likely to capture the market’s attention in 2021.
And of course, you can’t ignore a stock like Amazon (NASDAQ:AMZN). However the reality is that Amazon reaches into almost every segment of those key markets.
The Health Care Sector Needs Clarity
The future of the Affordable Care Act was front-and-center in the 2020 election. And it remains so as the calendar moves closer to 2021. If the law were to be struck down (which would be less likely in a Biden administration), that would be bad news for managed care providers. But there is another concern. If the Democratic party wrests control of the Senate, than significant health care reform is more likely. And that could spell trouble for private insurers, hospitals, and other affiliated industries.
On the other hand, telehealth will remain one of the big winners. The pandemic sped up the adoption of an idea that was long overdue. While there is no substitute for the human connection, the ability of patients to connect with doctors about “routine” and even some not-so-routine issues is a big win for patients and doctors alike.
Companies like Teladoc Health (NYSE:TDOC) are certainly a leader in this space. But you can look for other companies such as One Medical (NASDAQ:ONEM).
If They Build it, Their Stocks Are a Great Buy
Infrastructure stocks surged briefly after the election with the thought that a Biden administration would equate to higher spending on infrastructure. That may still turn out to be the case. However, stocks such as United Rental (NYSE:URI) and Caterpillar (NYSE:CAT) may struggle in the coming months particularly if businesses remain shut down. As in the summer, you could expect these companies to bounce back rather quickly, but this is certainly a segment to be looking at as a long-term buy.
And speaking of building things, another sector that is likely to remain strong in 2021 will be homebuilder stocks. The Federal Reserve is going to keep interest rates at a level near 0%. That means mortgage rates will be attractive. And many homeowners are deciding that their urban apartment is no place to work – or live - remotely.
Estimates came out this week saying it may not be until 2025 for New York City to get back to pre-coronavirus levels of economic activity. And already approximately 300,000 residents have fled the city. No matter how you look at it, there’s an urban flight, but people will still need places to live.
Travel Stocks Remain The Elephant In the Room
The narrative on travel stocks remains the same. There is pent-up demand for travel and once passengers get the all-clear via a vaccine, business will come back to normal. But that is going to lead to difficult questions. For example, according to Dr. Felicity Nicholson, lead doctor at Trailfinders Travel Clinic in the United Kingdom, specific destinations may require passengers to carry proof of vaccination. Many businesses are realizing that (some) business travel can be handled virtually. What percentage of that will come back is impossible to say. And even if it does come back, what percentage of workers will be comfortable traveling and/or getting the vaccine?
Overall, I believe our desire to travel is stronger than our hesitancy to get a vaccine I’m bullish on the long-term growth in the sector, but many travel stocks are no longer oversold. That means investors may have to wait on another dip before diving in.
The Final Word on Investing In a Post-Election World
I suppose my final work is to say that the final chapter has yet to be written. In fact, it’s fair to say that investors are only at the beginning of what promises to be a long story that may play out over several years.
The overly simplistic answer is that the economy will simply return to normal once the majority of Americans are vaccinated. The truth is far more complicated. There has been damage done to the economy. Businesses that were thriving are now closed for good. Millions of Americans are out of work. And yes, that number is down dramatically. But many businesses are not going to be inclined to hire workers without clearly understanding the tax ramifications for their business.
I’ve long been a bullish investor and I believe that stocks are the right place to be for the vast majority of investors. However, the market is not likely to enjoy the extreme attention it received from the Trump administration. Simply put, many stocks may be allowed to fail. And that means that you have to take action now to make sure the stocks you are investing in have a story that still holds up.
