A swift victory for President Donald Trump and a status-quo Congress, with the Senate under Republican control and the House held by Democrats, would probably be viewed by investors as positive for stocks.

“An orderly Trump victory” would probably be the “most favorable outcome for equities,” according to JPMorgan Chase & Co. strategists led by Dubravko Lakos-Bujas.

A second Trump term may lay to rest concerns over higher taxes and increased regulations, and while his 2016 promises of huge infrastructure spending haven’t been realized, extra expenditure in that area now would help construction companies and steel-makers.

The president’s protectionist stance could also help businesses with domestic operations and probably boost the oil industry. Weapons makers could be back in focus, while Republicans are viewed as more friendly toward digital currencies.

Stifel Nicolaus & Co. strategist Brian Gardner sees a “possible relief rally” due to less regulatory risk and a tax increase off the table. But a lack of clarity about what might constitute Trump’s agenda for the next four years might end up weighing on markets, he said at a recent press event.

At the moment, a Trump win is not the most likely scenario in national polls, with Democrat candidate Joe Biden leading the president by about 8 percentage points, according to RealClearPolitics. But some analysts point out that at this time in 2016, a Trump victory was also not a given.

“Biden’s lead is hardly insurmountable, and the polling margin of error means Trump might be much closer than it appears,” said Terry Haines, a founder at Pangaea Policy.

Wells Fargo & Co’s head of equity strategy Christopher Harvey said on Tuesday the presidential race looks “downright weird,” while Cowen analyst Jaret Seiberg cautioned that even though Biden “looks good for the win,” Trump should also be taken seriously.

The S&P 500 had rallied 58 per cent from Trump’s surprise 2016 victory to a record in February before the pandemic shuttered businesses and rapidly sent the U.S. economy into a recession. The benchmark has recovered those losses after wiping out 3 1/2 years of gains in March.

Now, markets may worry that a Trump win will lead to a ratcheting up of trade tensions, Gardner said, not only with China but with traditional allies, along with a continuation of highly polarizing domestic policies. Some fear health insurance coverage will decline, and moves that hurt environmental, social and governance investment also need to be considered.

Here’s what strategists are watching ahead of the vote (all percentages mentioned are year-to-date performances):

Energy, Financial Stocks

JPMorgan has a Trump “basket” that includes value stocks and firms poised to benefit from a post-pandemic recovery.

“Deep value, namely energy and financials,” would likely be key beneficiaries. Financial services stocks in the basket include Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Visa Inc., while Haliburton Co. and Exxon Mobil Corp. are among energy companies. The strategists also see “gridlock outcomes” as positive, with market volatility subsiding.

Stocks will rally if Trump holds the White House, because the likelihood of a Trump win hasn’t been factored into stock prices,” Integrity Asset Management portfolio manager Joe Gilbert said via email. He also expects close to US$2 trillion in pandemic aid would be passed.

Key stocks: Bank of America (-32 per cent), Citigroup (-48 per cent). Goldman Sachs (-15 per cent), Visa (+1.1 per cent), Haliburton (-49 per cent), Exxon Mobil (-53 per cent)

Trade War

Financial stocks might gain as the administration may “feel like it has gotten a new lease on life and will push hard for further deregulation,” Capital Alpha Partners’ Ian Katz wrote. While Trump officials have eased rules on banks, asset managers and other financial institutions, they “haven’t gone as far as most expected when Trump was elected,” he said.

On the other hand, a variety of companies including retailers, banks, and chipmakers, may suffer from an intensifying trade war.

“The list of companies impacted will need to expand beyond just retail as we anticipate the Export Control restrictions being expanded, China’s Unreliable Entity List being imposed and the two sides putting up an Iron or Silicon Curtain for the foreseeable future,” Veda Partners Director of Economic Policy Henrietta Treyz said via email.

That would hit not just companies like Walmart Inc., Nike Inc. or Gap Inc., but also banks like JPMorgan, chip manufacturers such as Intel Corp. and Nvidia Corp., along with other “high profile name-brand” companies like Ford Motor Co., General Motors Co. and Apple Inc., she said.

Key stocks: Walmart (+20 per cent), Nike (+26 per cent), Gap (+15 per cent), JPMorgan Chase (-29 per cent), Intel (-24 per cent), Nvidia (+128 per cent), Ford (-15 per cent), General Motors (-4.6 per cent), Apple (+59 per cent)

Small Caps, Industrials

Integrity’s Gilbert said that small cap, industrial and material stocks should do well in any case, because both Biden and Trump have communicated a “willingness to spend (at least initially).” In industrials, he likes Oshkosh Corp., as well as suppliers to big companies like Caterpillar Inc. and Deere & Co., such as Kennametal Inc.

Gilbert joins many others with the view that more pandemic aid is coming no matter who wins. But a victory for conservatives might serve to strengthen Republican disdain for more spending, particularly for unemployment insurance and aid for state and local governments.

That may be key for millions of Americans as the crucial holiday spending season approaches. According to a Harris Poll conducted in partnership with Bloomberg News, 58 per cent of U.S. consumers say they will have less spending money this year due to the pandemic.

Key stocks: Oshkosh (-22 per cent), Kennametal (-17 per cent), Caterpillar (+6.9 per cent), Deere (+32 per cent)