JPM: Tech stocks likely to be helped, hurt by potential policies after U.S. elections

As investors wait on the results of the U.S. federal elections next week, JPMorgan Chase listed technology stocks it expects may be impacted positively or negatively by potential changes in corporate tax rates, tariffs and other policies.

The marquee presidential race between Vice President Kamala Harris and former President Donald Trump is tight. But investors are also watching the outcome of House and Senate races that may result in either a Democratic or Republican Party sweep in Washington or a split Congress.

“In aggregate, we expect the most significant outcomes in the near-term to be relative to the corporate tax rate with the two potential administrations wide apart in relation to their stated policy on this front,” JPMorgan analyst Samik Chatterjee said in an equity research note Friday.

While the possibility of lower corporate taxes under a Republican administration may serve as a tailwind, hardware companies particularly face offsets such as tariffs because they rely on Chinese manufacturing, he said. Potential U.S. dollar (DXY) appreciation would also be a challenge.

“Nevertheless, we believe these factors are likely to result in a net positive for a large part of our coverage universe, given the potential demand tailwinds,” Chatterjee said.

Here’s a partial overview of what JPMorgan sees as potential policy-led drivers for its Hardware and Network coverage:

Topic: Corporate Tax Rate

Potential increase in the rate to 28% under Democratic Party policy. Negative for: Apple (AAPL), Motorola Solutions (MSI), F5 (FFIV), HP (HPQ), Cisco (CSCO).

Potential rate decrease to 15% under Republican Party policy. Positive for: CDW (CDW), Motorola Solutions (MSI), Arista Networks (ANET).

Topic: Tariffs

Enact global tariffs in 10%-20% range under Republican Party policy. Negative for: Apple (AAPL), Dell (DELL), Hewlett Packard Enterprise (HPE), HP (HPQ), Logitech (LOGI).

Expected higher tariff increase for China and Mexico under Republican Party policy. Positive for: Flex Ltd. (FLEX), Jabil (JBL) – long-term.

Topic: FX

Expected U.S. dollar strength under Republican Party policy. Negative for: Apple (AAPL), Corning (GLW), Logitech (LOGI), Hewlett Packard Enterprise (HPE), HP (HPQ), TE Connectivity (TEL).

Topic: M&A

More lenient oversight under Republican Party policy. Positive for: Qualcomm (QCOM), Cisco (CSCO), Hewlett Packard Enterprise (HPE), HP (HPQ).

Topic: Electric Vehicles

Negative view under Republican Party policy. Negative for: Wolfspeed (WOLF), TE Connectivity (TEL), Amphenol (APH).

Topic: Police / Border Patrol

Positive on police/border funding under Republican Party policy. Positive for: Axon Enterprise (AXON), Motorola Solutions (MSI).

For investors looking to track the elections through market instruments, here are some politically driven Republican and Democratic exchange-traded funds:

• God Bless America ETF (YALL)
• American Conservative Values ETF (ACVF)
• Point Bridge America First ETF (MAGA)
• Democratic Large Cap Core ETF (DEMZ)
• Unusual Whales Subversive Democratic ETF (NANC)
• Unusual Whales Subversive Republican ETF (KRUZ)

Readers interested in investing topics tied to the upcoming election can read coverage from Seeking Alpha’s Investing Forum: Election 2024 event; please visit this page.

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