An election between Donald Trump and Hillary Clinton will be a lot closer than the consensus expects, weighing on the overall market while offering an opportunity for some select stocks that will benefit from the rhetoric coming from both sides during the bitter fight, according to Goldman Sachs.
"Although prediction markets currently assign a high probability that Hillary Clinton will win the election, polls in prior contests tightened as voting day approached. Increasing political uncertainty will lift equity market uncertainty in coming months," Goldman Sachs' David Kostin wrote in a note to clients over the weekend. "From a portfolio strategy perspective, protectionism and tax policy are two areas of debate that have investment implications. Buy stocks with high U.S. sales and high effective tax rates and avoid firms with high foreign sales and low tax rates."
The S&P 500 could fall as much as 10 percent as the election approaches, but the market will recover before the end of the year back to 2100, according to Kostin.
"Our view is the closeness of the current race is underpriced by the market," he added.
"Protectionist rhetoric will become louder as election season progresses and stocks with high U.S. sales will outperform firms with foreign sales," the note states. Meanwhile, because both candidates are promising tax reform, shares of companies with high tax rates could benefit as election day approaches as well, according to the firm.
There are some companies that fall into both those categories, making them the ideal stocks to own. We highlight them below: