Market Insider

What a Clinton presidency really means for the stock market

Sharp contrast between Clinton and Trump: Roger Altman

Wall Street — and the stock market — may now be comfortable with the idea of a Hillary Clinton victory, but her policies and those of other Democrats may not be particularly good for the lagging oil sector, minimum wage employers, financial companies, big tech and biotech companies, among others.

Other sectors could be winners, however, including hospitals, internet companies, solar, clean energy, discount stores, railroads, and media and entertainment content companies. There is also a whole group of companies in infrastructure, defense and cybersecurity that would stand to win from both her policies and and the Republican Party in its platform.

"There are remarkably more similarities than differences. That's the irony of this whole thing," said Jack Ablin, CIO of BMO Private Bank. "This is such a bitter fight, and yet many of their core strategies are similar, which is the first time I've seen that in a long time. I'm not sure I'd want to be Bank of America in here." Both candidates propose breaking up the big banks.

Everything is negotiable in these platforms, but it does reflect a pervasive view in both parties that is anti-business.
Greg Valliere
Horizon Investments

The success of either candidate's platforms depends on the makeup of Congress and the ability of the next president to work with legislators. Analysts also note that just because something is in a platform does not mean it will be pursued once the candidate takes office, especially if it costs money.

"I think both parties here are remarkably similar on trade and anti-corporate provisions. It's a trend that the Chamber of Commerce and the National Association of Manufacturers realize. It's still below the radar just how anti-business both platforms are. Everything is negotiable in these platforms, but it does reflect a pervasive view in both parties that is anti-business," said Greg Valliere, chief global strategist at Horizon Investments. "I don't see her with a pro-growth agenda, and I have no idea what Trump's agenda is. His agenda is unclear on economic issues."

While Wall Street is not crazy about Democrats, the view has been that Clinton is a safer bet for the market since she is a known entity and Trump is more unpredictable. If he were to pull substantially ahead in polls, the markets may react.

"I would say we would see a risk-off scenario if that's the case," said Ablin.

Trump and Clinton have both opposed the pending Trans-Pacific Partnership trade deal. But Trump has been much more vocal about throwing out existing trade partnerships. That is seen as a negative for U.S. industrials, like Caterpillar and GE which rely on overseas sales.

Surprisingly, both Republicans and Democrats have said in their platforms that they would consider returning to some form of Glass-Steagall, a Depression-era rule that separated commercial banking from investment banking. Bringing it back could mean breaking up the big banks, like JPMorgan Chase and Citigroup. Clinton would also add a transaction tax on high-frequency trading, which could affect a whole range of Wall Street firms.

Both candidates talk about strengthening the military, and while many of the same companies would benefit, analysts at S&P Global Market Intelligence believe Clinton's spending plans would differ from those of Trump.

Cybersecurity and surveillance companies could incrementally benefit under a Clinton presidency, according to Scott Kessler, deputy global director of equity research at S&P Global Market Intelligence. "I think the traditional (defense companies) all could see a leg up no matter who becomes president. The point, on the margin, is we think there's going to be a more diversified approach to the spend under a Hillary Clinton, rather than a Donald Trump who continues to talk about the strength and power of the military," he said.

I think the traditional (defense companies) all could see a leg up no matter who becomes president. The point, on the margin, is we think there's going to be a more diversified approach to the spend under a Hillary Clinton, rather than a Donald Trump who continues to talk about the strength and power of the military.
Scott Kessler
S&P Global Market Intelligence

Therefore companies like L-3 Communications could be winners, along with cyber and cloud companies. Drone companies may also do better with Clinton. According to S&P, information technology companies like CACI International and CSRA could also benefit.

Trump, on the other hand, may be better for traditional defense companies like Lockheed or Raytheon, according to Kessler.

Clinton would raise minimum wages, and the Democrats are targeting $15 an hour, but Trump recently weighed in during a television interview and said he could see minimum wages going up to $10.

Higher minimum wages would be a negative for restaurants, hotels and retailers, but some retailers could be winners. Wal-Mart, for instance, could feel the pinch of rising wage costs, but it could also see sales go up because many of its shoppers are lower-income workers. The same could be true for dollar stores and other discounters.

Trump's policy on immigration and anti-Mexico comments could hurt agriculture since his tougher rule, along with his plan to build a wall on the southern border, would keep potential workers from coming into the country. Hotels and restaurants could also be hurt as a result of fewer immigrant workers.

When it comes to taxes, Trump is seen as more business friendly, as he wants to lower the corporate tax rate. He is also expected to be positive for the big technology and pharmaceutical companies that are hoarding cash overseas since he favors a change in corporate tax rates and a repatriation holiday that would entice companies to bring their foreign earnings home.

"In doing an analysis of the tech companies in the , you see a handful of companies that are paying 15, 16 percent tax rates. I would argue those type of companies would definitely be in the cross hairs of a new approach to taxation from the Clinton presidency," said Kessler, noting IBM and Alphabet would be on that list.

Both candidates want to boost infrastructure spending, with the Republicans more focused on roads and bridges than mass transit. Clinton, on the other hand could be more favorable for railroads.

"We will put Americans to work updating and expanding our roads, bridges, public transit, airports, and passenger and freight rail lines," said the Democratic platform. It also plans for an infrastructure bank that would provide funding and loans for traditional infrastructure and broadband projects.

Railroad companies, like CSX and Norfolk Southern, could get a boost, as passenger trains travel over company-owned freight lines. Railroads, which ship oil, could also benefit from Clinton's energy policy, if she follows the Obama administration's pattern of rejecting new pipelines. The most high profile to be rejected was the controversial TransCanada Keystone XL pipeline.

A Clinton administration is also expected to be negative for oil and gas producers. She has pushed for stricter regulations for frackers, but the Democratic platform also proposes ending tax breaks for oil and gas companies.

Clinton also favors moving away from fossil fuels in favor of renewables.

"She wants to cut U.S. oil consumption by a third and replace it with 500 million solar panels," said Ablin. That could help companies like First Solar, Sunpower and SolarCity.

Clinton supports retaining the Affordable Care Act and net neutrality, both under attack from Republicans. That would be a positive for health-care services companies and hospitals, like Tenet Healthcare and HCA.

Clinton however is viewed as negative for biotechs and drugmakers. The first and biggest market reaction to Clinton was in biotech, which sold off sharply last September after she sent a tweet saying she would go after price gouging. The iShares Nasdaq Biotech ETF IBB recovered in subsequent weeks, but it traded off and has been bumping around in a new lower range. According to Strategas, biotech is more than 80 percent correlated to Clinton's prospects.

Along with retaining net neutrality, Democrats would like to build out broadband and make wireless internet available across the country, something that could benefit content providers like Netflix and Facebook.

According to UBS, technology could do well if either candidate wins this year. Based on a study of elections that brought a significant candidate, tech was the clear winner. Both candidates are considered transitional since Trump is a political outsider and Clinton is the first woman nominee.

In their platform, Democrats stress building on the internet's reach and new technologies.

"Democrats will finish the job of connecting every household in America to high-speed broadband, increase internet adoption, and help hook up anchor institutions so they can offer free Wi-Fi to the public. We will take action to help America widely deploy 5G technology — the next generation wireless service that will not only bring faster internet connections to underserved areas, but will enable the Internet of Things and a host of transformative technologies," the Democratic platform says.

A host of companies involved in those technologies could benefit, but Democrats want to keep net neutrality and perhaps even expand it, which could hurt telecommunications companies, like Verizon, AT&T and Comcast,, which owns CNBC parent NBCUniversal, according to S&P.

Clinton is seen as negative for big banks because of the Democrats idea of a modern Glass-Steagall, but she has not been viewed as someone who would personally favor that. She would also keep new post-financial crisis Dodd-Frank regulations in place for banks, something Trump would abolish.

"I start from the premise that platforms mean very little, that people will forget them within a week, that they are not binding, and sometimes a candidate and their campaign won't even fight hard against parts of their platform they don't like," said Brian Gardner, director of Washington research at Keefe, Bruyette & Woods. But he does believe there's a chance the big banks could be on the chopping block no matter who wins, since they may be used as a bargaining chip for a bill to help community banks.

Clarification: This version clarifies that IBM and Alphabet have very low tax rates and could be impacted by a change in tax law.