How four election outcomes could impact the markets, according to Société Générale

Société Générale analysts examined four potential election outcome scenarios and how they could impact the markets.

Trump win and a split Congress

A Trump victory plus a split Congress could lead to higher tariffs, but no material tax cuts, with the markets pricing in a risk of mild “stagflation,” according to Manish Kabra, head of U.S. equity strategy.

Tariffs would be a negative without supportive fiscal measures, he said.

Trump “sweep”

If Trump wins the White House and Republicans get Congress majority, it would lead to tax cuts and a “reflationary backdrop,” said Kabra.

Harris win plus a split Congress

This scenario would have no major changes to the core allocations.

Harris “sweep”

This scenario could lead to “higher corporate taxes, a buyback tax, and an increase in capital gains on high earners, possibly impacting the capex cycle,” said Kabra. Green energy policies could lead to more investments in that area.

Other important impacts:

• Profit growth rate is expected to slow over the next six months – S&P 500 Equal Weight (RSP) over the Nasdaq 100 (NASDAQ:QQQM).
• Energy sector (XLE), oil and gas (XOP), (OIH), and renewables (TAN), (ICLN), (PBW) and defense (ITA), (XAR), (PPA) are the most sensitive to the election outcome.
• Corporate tax changes would cause big S&P 500 (SP500) moves.
• Yields will likely lower unless a “sweep” causes focus on deficits.
• “A slip Congress limits the ability to deliver the desired fiscal stance of either candidate, either through increased spending or lower taxes,” said Kabra. “That likely weakens the dollar relative to a baseline assumption.”

Societe Generale’s Democrat basket:

• Bright Horizons Family Solutions (BFAM)
• Constellation Energy (CEG)
• DR Horton Inc. (DHI)
• Enphase Energy Inc. (ENPH)
• Freeport-McMoran Inc. (FCX)
• Honeywell International Inc. (HON)
• Lennar Corp. (LEN)
• Microsoft Corp. (MSFT)
• NextEra Energy Inc. (NEE)
• Palo Alto Networks Inc. (PANW)
• Roper Technologies Inc. (ROP)
• SLM Corp. (SLM)
• Sterling Infrastructure Inc. (STRL)
• Stride Inc. (LRN)
• Tesla Inc. (TSLA)
• UnitedHealth Group Inc. (UNH)
• Uranium Energy Corp. (UEC)
• Waste Management Inc. (WM)

Their Republican basket:

• Atmos Energy Corp. (ATO)
• Automatic Data Processing Inc. (ADP)
• Blackstone Inc. (BX)
• Coinbase Global Inc. (COIN)
• Halliburton Co. (HAL)
• Honeywell International Inc. (HON)
• IDEX Corp. (IEX)
• Lockheed Martin Corp. (LMT)
• Nucor Corp. (NUE)
• PACCAR Inc. (PCAR)
• Prologis Inc. (PLD)
• Regions Financial Corp. (RF)
• Rockwell Automation Inc. (ROP)
• RTX Corp. (RTX)
• Steel Dynamics Inc. (STLD)
• Teledyne Technologies Inc. (TDY)
• Union Pacific Corp. (UNP)
• United Parcel Service Inc. (UPS)
• Vulcan Materials Co. (VMC)

Dear readers: We recognize that politics often intersects with the financial news of the day, so we invite you to click here to join the separate political discussion.

More on Invesco Nasdaq 100 ETF, S&P 500 Index, etc.

• Impacts From The Fed’s Rate Cut Already Priced In
• Q3 Market Cycle Update: Navigating Contradictory Market Signals
• SP500: The Fed Can’t Get More Dovish Than This
• S&P closes above 5,700 and Dow ends above 42K in historic firsts as Wall Street soars
• SPY eyes biggest jump after a scheduled Fed meeting since the 2008 financial crisis