The U.S. election is about two weeks away – and who winds up in the White House and in Congress could have an impact on key corners of the stock market, according to Bank of America. “Profits accelerating are far more important than who is sitting in the Oval Office. But politics can make or break sub-sectors,” the firm wrote in a Friday note. With this in mind and with volatility expected to rise as the Nov. 5 election nears, Bank of America strategists say it’s now a stock picker’s market. “Now is not the time to close one’s eyes and buy the index,” the investment bank said. Here are some of the ways Bank of America analysts think the upcoming election results could affect the stock market. Harris presidency, split government A victory for Democratic candidate Kamala Harris in the White House, plus a Republican-controlled Congress, could be “the best outcome” for online media companies, according to Bank of America analyst Justin Post. He noted that Harris is likely to enforce a potential ban on TikTok — which could boost Meta Platforms and Snapchat . META YTD mountain Meta Platforms in 2024 “While a Democrat-led [Department of Justice] will likely continue to bring more antitrust pressure to the Big-3 ( GOOGL , META, & AMZN ), a split congress is less likely to pass legislation that could change [the] current operating environment,” Post wrote. Meanwhile, Harris’ plan to increase corporate income taxes to 28% from the current level of 21% would likely pose a headwind to retailers that have high domestic exposure, according to analyst Lorraine Hutchinson. During Donald Trump’s first term in office, his corporate tax rate cut — the opposite scenario — led to most businesses re-investing the savings in their businesses, per Hutchinson. Some stocks exposed to this risk include clothing retailers such as Lululemon Athletica , American Eagle Outfitters , Gap and Urban Outfitters . Beauty retailer Ulta and discount chain Five Below may also be hurt, according to the analyst. Health-care facility stocks such as Tenet Healthcare and Universal Health Services could also benefit as Harris would likely work to expand Medicaid coverage — a boost for providers, said analyst Joanna Gajuk. To be sure, managed care companies may be negatively affected by changes to Medicare Advantage under Harris. “Democrats have been more focused on potential overpayments and implementation of more regulations to govern how business is run. President does not need congress to influence rates and regulations,” Gajuk wrote. She added that UnitedHealth Group , Agilon Health and Humana could see some downsides from this case. Harris presidency, Democratic party sweep Meanwhile, full Democratic party control of the executive and legislative branches could result in a significant increase in telecom and cable policy regulation, per analyst Jessica Reif Ehrlich. “Under this scenario, we also believe media companies would likely be prevented from carrying out much needed consolidation,” Ehrlich said. Big Tech would also experience more aggressive regulatory pressure under Harris and a Democratic-led Congress, the firm added. Smaller-cap media and e-commerce companies are potential winners under this case, as well as Snapchat, Meta and Alphabet in the short term if a TikTok ban is enforced, per internet analyst Post. Meanwhile, tech companies centered around the gig economy such as Uber and Lyft are at risk, he added. For the payments sector, a Democratic sweep “would be the worst-case scenario,” said analyst Jason Kupferberg. “If the White House and Congress are politically aligned, passage of new legislation would likely be easier,” Kupferberg said. He referred to Democratic Senator Dick Durbin’s proposed Credit Card Competition Act , which would introduce higher competition in the U.S. credit card sector if it were to be passed. Trump president, split government A win for Republican candidate Donald Trump and a split government would be the best-case scenario for bank stocks, per analyst Ebrahim Poonawala. “A Republican win with divided Congress should serve as a sentiment positive for bank stocks given the reduced risk of onerous regulations, potential for a pick-up in M & A activity (bank M & A and larger deal activity across S & P sectors) and less likelihood of tax hikes that could dampen economic activity,” Poonawala wrote. This election scenario would also likely result in compromises over the Inflation Reduction Act and potentially result in wins for both Democrats and Republicans — and investors do not expect a total repeal of the IRA under Trump, according to analyst Dimple Gosai. For managed care stocks with ties to health insurance exchanges and Medicaid, a Trump presidency and a divided government would likely pose a headwind, said Gajuk. She added that Trump could potentially undermine funding and enrollment for Medicaid. Further, Trump will likely call for an end of enhanced Affordable Care Act exchange subsidies, which are set to expire at the end of 2025 . There will likely be pushback from Congress. This scenario could be a negative one for Oscar Health and Centene , per Gajuk. On the other hand, a Trump presidency would be viewed positively by gig-economy companies, including Uber and Lyft, according to analyst Post. The “GOP is perceived as pro-growth for a high-growth sector and a divided congress is less likely to pass a new employment legislation/revival of PRO Act,” he wrote. The Protecting the Right to Organize, or PRO, Act is a proposed legislation aimed at increasing labor unions’ rights and worker protections. E-commerce companies could also possibly see tailwinds from higher tariffs on China proposed by Trump, Post added. Trump president, Republican party sweep Under this case, lower regulation and potential reforms aimed at weakening the Securities and Exchange Commission’s market structure rules would be a boost for diversified financial companies, said analyst Craig Siegenthaler. However, full Republican control would likely result in higher volatility and deficits for asset managers, brokers and exchanges. “This could hurt most names excluding CME / CBOE which benefit from volatility,” Siegenthaler wrote. Live Nation Entertainment , which is the target of an antitrust lawsuit filed by the Department of Justice, would benefit from Trump and the Republican party’s less-aggressive stance on antitrust enforcement, analyst Ehrlich added. Homebuilders are also at risk if the Republican party sweeps Washington. “We do see some risk that the construction industry relies heavily on foreign trade labor and tighter immigration or deportation could create labor shortages,” analyst Rafe Jadrosich wrote. Meanwhile, more tax cuts and near-shoring efforts — as well as a likely weaker dollar — could help paperboard and packaging companies such as Smurfit WestRock , Packaging Corporation of America and Graphic Packaging . For retailers, Trump’s proposed increased tariffs on China would be the most negative for Skechers , Crocs and American Eagle Outfitters, according to the firm. —CNBC’s Michael Bloom contributed to this report.
