The equities market isn’t as straightforward. The potential effects widen as investors note what sectors may outperform or lag depending on election outcomes ranging from a red sweep, a divided government, or the renewed potential of a Democratic win under Vice President Kamala Harris’ lead.
The uncertainty has banks and investors split about what they believe would outperform or be a safe haven. The stock market reshuffled in the 24 hours around the first presidential debate held in June, showing a flee from renewables and utilities and a flood into real estate and energy: a signal that the market anticipated a Trump win and expected the former would do poorly while the latter would outperform.
According to a July note from Societe Generale, one of the few themes t that has done well regardless of whether Republicans or Democrats had Washington isn’t a sector but rather the strategic positioning of stocks set to benefit from US reshoring initiatives, which is the process of bringing manufacturing back to the US.
It’s counterintuitive because trade wars, especially with China, have generally been associated with the former Trump administration. And that’s not wrong: revenue from increased tariffs reached $79 billion in 2019, almost double where they were in 2017, according to data from the Federal Reserve Bank of St Louis. The catch here is that the Biden administration largely kept them in place but made some cutbacks on imports from the European Union while adding additional tariffs on Chinese imports, according to the Tax Foundation.
In short, US shoring activity is likely to increase. Another effect is nearshoring, or trading with countries closer to the US. This is also expected to continue rising as it did during Trump’s administration.
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The chart below from Societe Generale shows US imports from China plunged in 2017 due to trade wars under the Trump administration. Meanwhile, trade between the US, Canada, and Mexico, which are members of USMCA, increased.
The chart below from Societe Generale shows Mexico as the biggest beneficiary, while Vietnam and Taiwan also benefited from slowed trade with China. Canada was the fourth-largest beneficiary.
As global trade continues to shift, Societe Generale lists 10 North American stocks that are expected to be the winners of the reshuffle.
US companies
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Union Pacific’s (UNP) railway business transports agriculture, automotives, and chemicals across the country and connects to Canada and Mexico.
RTX Corp (RTX) provides aviation systems and interiors.
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Prologis (PLD) is an industrial real estate provider that leases distribution facilities for third-party logistics providers and retailers.
Automatic Data Processing (ADP) provides human resources solutions, including for truck and marine vehicles.
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United Rentals (URI) industrial and wholesale rentals that serves the construction and commercial industry.
Quanta Services (PWR) installs lighting and transportation control systems for industrial and commercial customers.
Steel Dynamics (STLD) is a carbon steel producer and metal recycler.
USMCA companies
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As for Canadian companies, the two names include auto parts provider Magna International (MG CT) and machine engineering manufacturer ATS Corp (ATS CT).
A company from Mexico includes cement and concrete maker Cemex SAB de CV (CEMEXCPO MF).
