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Is the stock market betting on Biden?
That would be one conclusion from a recent J.P. Morgan analyst note looking at the recent performance of two baskets of stocks—one filled with names that would do well under a Biden administration, and the other populated by stocks that would thrive under a second Trump term.
According to the analysis, which looked at performance going back to December 2019, the “Biden basket” is outperforming the Trump basket by 66%.
And when they drilled down to individual themes each candidate has stressed on the campaign trail, the performance was “even more bifurcated.” As they wrote, “Alternative Energy/Green Tech stocks (key beneficiaries under Biden basket) are outperforming Traditional Energy/Fossil Fuels (beneficiaries under Trump basket) by ~84% since June.”
A few of the best performing “Biden” stocks? Tesla (up 405% year to date), infrastructure names like Jacobs Engineering (up 9%), and Caterpillar (up 13%), as well as what the analysts call “minimum wage beneficiaries” such as Whirlpool (up 33%), Dollar General (up 41%), and Lowe’s (up 46%).
Though a recent Goldman Sachs report found that Democratic wins in the White House and Congress would improve the prospects for the U.S. and global economies, the J.P. Morgan analysts conclude that an “orderly” Trump victory would be the “most favorable outcome for equities” with an upside on the S&P 500 to around 3,900. “We also view gridlock outcomes as a net positive with market volatility likely subsiding and driving mechanical re-leveraging within equities. A ‘Blue Sweep’ scenario is expected to be mostly neutral in the short term as it would likely be accompanied by some immediate positive catalysts (i.e. larger fiscal stimulus/infrastructure) but also negative catalysts (i.e. rising corporate taxes).”
Interestingly, in a recent poll of investors by Fortune and Survey Monkey, a majority of respondents felt that Trump would do a better job growing the stock market. As Fortune’s Lance Lambert wrote, “By a +12 percentage point margin, investors think Trump (54%) would do a better job growing the stock market than Biden (42%).”
That’s despite the fact that in recent history Democratic Presidents have actually seen higher stock market returns than Republicans. As Lambert wrote, “In Trump’s first term the S&P 500 index grew 11.6% on an annualized basis. That’s higher than the annualized return of the past three Republican Presidents: Ronald Reagan (10.2%), George H.W. Bush (10.9%), and George W. Bush (-12%). But it’s below the levels seen under Bill Clinton (15.2%) and Barack Obama (13.8%).”
