Some Stocks May Benefit from a Trump Reelection

With opinion polls shifting rapidly, investors are considering the "Trump Trade" as the non-consecutive President in over a century may win the 2024 US elections.

Republican, But Also Trump

According to RealClearPolitics, the latest national polling averages marginally favour Vice President and Democratic presidential candidate Kamala Harris over former President and Republican candidate Donald Trump by 0.9%, a difference within the margin of error. However, the election is determined by the Electoral College, not the national popular vote. Current projections give Trump the advantage in the Electoral College by 312 to 226, and he is also ahead by 1.0% in key battleground states. As a result, the odds of betting favouring Trump have shifted around 60% to 40%.

Investors have begun positioning behind these odds, as the "Trump Trade" appeared to be re-emerging in the lead-up to last weekend. A Republican White House under Trump would naturally imply changes in policy direction, unlike Harris, who is widely expected to maintain the current policy course set by President Joe Biden (even Harris has struggled to clearly articulate how her administration would differ substantially from Biden's). Traditionally, sectors of the economy, such as energy, automakers and defence, tend to benefit more under a Republican administration. However, Trump's focus on nationalism, threats of tariffs and unpredictability introduce a twist on typical stock choices in the advent of a political change in November.​

Beyond the Ordinary

Tesla - To illustrate a potential Trump administration's unique impact on markets, consider the world's largest electric vehicle (EV) maker. Democrats typically promote EV adoption, while internal combustion engine (ICE) carmakers see gains under Republicans through relaxed rules. A Trump administration is expected to reduce subsidies for green cars. However, Tesla's relatively lower costs and domestic manufacturing may provide a competitive advantage, especially if Trump raises tariffs on materials its rivals import from China for batteries.

GEO Group - Another possibly contentious selection, mainly due to one of Trump's more debated positions: Combating unlawful migration. GEO designs, builds and supports prisons, immigration centres and prisoner transport. The company may benefit from a Trump programme to deport migrants, potentially explaining maximum donations to his campaign. GEO stock doubled after Trump's 2016 election.​

GEO in Broadening Wedge

GEO stock appears to be forming a broadening wedge pattern with two peaks of $16.30 and $18.00 and two troughs of $12.50 and $11.70, respectively. If the $14.30 level holds firm, it will increase the likelihood of extending past the top as traders await a clear breakout, potentially reaching $20. However, if the stock loses the active $12.50 level, its price may move down towards $10.​

Source: SpreadEx / The GEO Group

Key Takeaways​

Certain stocks may benefit from a Trump reelection as polls show Trump has an advantage in key swing states based on current projections. Should Trump win, sectors like energy, automakers and defence may see gains due to a typically pro-business Republican stance. However, Trump's focus on nationalism and tariffs could impact specific companies differently than normal partisan trends. For example, Tesla's lower costs and domestic production may help it compete if subsidies decrease, but tariffs on Chinese imports may rise under another Trump term. Moreover, private prison operator GEO Group, which has benefited from and donated to Trump's immigration policies, shows a technical pattern that could see its stock extend gains toward $20 per share.