Christmas has come early for the bank’s shareholders with the decision to slightly increase the 2024 dividend – despite a single-digit decline in the net profit and cash earnings.
Beating the market benchmark is never easy, with 72 per cent of Australian actively managed global equity general funds trailing the S&P World Index in the six months to June 30, 2024. Domestic equity funds performed slightly better, albeit against a significantly lower bar set by the S&P/ASX 200 Index.
Who wins from a Trump or Biden Presidency?
Which stocks will stand out if Trump or Biden wins the Presidency?
When it comes to politics, it is best to leave personal opinions and views separate from investment decisions, as they rarely have any great significance to the share market. In saying that, the upcoming Presidential Election is one of those few political events that can create short-term share market havoc, as seen in the last election. In this article, we highlight one potential winner for a Republican victory and another for a Democrat victory.
Late last week, Trump’s COVID-19 diagnosis threw markets into a tailspin, as investors offloaded positions in energy and Big Tech, worried that a Biden Presidency would be bad for markets. While betting odds should be taken with a grain of salt, the bookies’ odds have been in favour of a Biden victory for a while. This time last month, Biden led Trump by 28 percentage points, but that gap has vanished, after Trump’s doctors said his condition has been improving and his return to the White House. Odds are now neck and neck.
Before we talk stocks, here are the main differences between the two parties:
| Biden – Democrats | Trump – Republicans |
| Left-leaning | Right-leaning |
| Minimum Wage – higher taxes for higher income earners. Biden wants raise $15ph | Low taxes |
| Government regulation | Free markets – Capitalism |
| Military – low spending | Military – high spending |
| Government involvement in healthcare | Private companies can provide healthcare services |
| Pro climate change | Anti climate change |
| Debt – Usually higher | Debt – advocate fiscal responsibility |
| Soft on China | Hard on China |
| COVID-19 – Favours lockdowns | COVID-19 – Will open economy back to business |
| Biden is a multilateralist | Trump is a unilateralist |
Despite all the protesting and the COVID-19 pandemic, the US stock market has been quietly humming along, seemingly without a care in the world. Looking at the table above, it would seem markets would prefer a Trump victory because he is pro-business, and Biden would not be good for capital or taxes. He could roll back Trump’s US$2 trillion ($2.8 trillion) worth of tax cuts.
Unfortunately, there are so many more variables involved in trying to predict share market movements, it is not as straightforward as one would think. For example, Trump has been tough on China, but in reality he appears to have weakened the United States’ traditional alliances and international reputation, and given China a chance to be more assertive on the international stage. Biden would reinstate US support for multilateral organisations, and strengthen trade and North Atlantic Treaty Organization (NATO) military alliances. This would constrain China, and be seen as a positive for share markets.
Reflecting on the above table, here are some potential winners from global markets:
Trump Victory – Lockheed Martin (NYSE: LMT)
Lockheed Martin is the world’s largest defence contractor, which has designed and manufactured the F-22 Raptor and F-35 stealth fighters, and the THAAD anti-ballistic weapons system, among more recent products. The Republicans are traditionally seen as military “hawks,” and usually increase military budgets, while Democrats traditionally reduce spending. Lockheed posted a strong 2Q result in July with an earnings increase of 22.6% to $6.13 a share, which beat analysts’ expectations. It raised sales guidance as a result to $63 billion-$65 billion. Going forward, the company is developing autonomous military vehicles enabled by 5G. Wall Street has 6 ‘Buy’ and 5 ‘Hold’ recommendations. The stock hit an all-time high in February at $442. A Trump victory may see Lockheed Martin continue its good run.
Biden Victory – Tesla (NASDAQ: TSLA)
Biden is very big on climate change, which means Tesla is one of the main beneficiaries of a Biden presidency. The Democrat has even stated that one of his main goals is to ensure the US is the leader in electric vehicle (EV) production. This puts Tesla in pole position. Sure, Tesla doesn’t need Biden to increase sales, but a pro-EV White House would provide a big boost to Tesla’s share price. Despite concerns about the revenue losses stemming from the COVID-19 pandemic, Tesla delivered well above the number of EVs it was expected to deliver during the second quarter. For that reason, a Biden victory will boost and help support Tesla’s current bull run.
