Republican, Democrat stock baskets from UBS heading into election

With polling forecasting a close race in the U.S. presidential election , UBS is eyeing two baskets of stocks to prepare for either outcome. UBS strategist Andrew Garthwaite said a win for former President Donald Trump would be a net positive for equities, as opposed to a victory for Vice President Kamala Harris , which is seen as a tactical negative. Specifically, Garthwaite expects a Trump administration would lead to U.S. stock outperformance for sectors including financials, due to a potentially more lenient regulatory environment and outsized domestic manufacturing in the event of increased tariffs on imports. Trump’s tariff proposal is widely viewed as inflationary , a notion Garthwaite also pointed out in his Oct. 25 note, and could in fact push interest rates higher in the U.S. , according to the Institute of International Finance. A Harris administration, however, could help boost companies that have higher consumer exposure to China as well as firms involved in global trade such as freight companies. Stocks are lower so far this week, with the S & P 500 losing 0.8%. In the week before past elections, the broad market index has typically notched a median gain of 0.76%, per FactSet data . Overall, UBS said stocks within its Trump administration beneficiaries basket indicate a win for the former president next week. Garthwaite cautioned about the unpredictability of elections, as evident in the 2016 U.S. election and the Brexit vote. Here is a look at some of the stocks UBS has placed in each grouping. Financial stocks dominate the Trump list, including Citigroup and Goldman Sachs . Both banks beat third-quarter earnings estimates in early October , with the pair noting growing strength in their investment banking segments. Goldman Sachs notched a 20% increase in investment banking revenue in the third quarter. Stock in the David Solomon-helmed firm has advanced 33% in 2024. GS YTD mountain Goldman Sachs stock. “Ordinarily, a Trump victory would favour the banks due to potential lighter-touch capital regulation, as well as the investment banks (from increased M & A activity on deregulation) and life companies (from a steeper yield curve),” Garthwaite said. C YTD mountain Citi stock. Citi stock has gained more than 25% in 2024. One of the areas of the market at risk in the event of a Trump win would be utilities, Garthwaite added, as he predicts higher bond yields, which would serve as a headwind to the sector. He added that utility stocks were among the worst-performing sectors following Trump’s 2016 election. Also, a Trump administration could roll back some actions that were favorable to utilities with exposure to renewables. Stocks that could flourish under a Harris administration include clothing and footwear giant Nike . Shares have pulled back 30% in 2024. Nike surpassed Wall Street’s estimates for revenue in the first quarter, although the firm withdrew its full-year guidance. NKE YTD mountain Nike stock. Due to the company’s exposure to China, a Democratic victory could allow companies in Beijing to breathe a sigh of relief, as a Harris victory would dampen worry over steep tariffs on Chinese imports, Garthwaite said. Other sectors that can benefit from a Harris win include homebuilding as well as child care and employment agencies, Garthwaite added.