Trump vs. Harris: How Will the Election Affect the Stock Market?

In the lead-up to the 2020 election, then-President Donald Trump warned that if Joe Biden was elected, "stocks will crash like you've never seen before."

However, since President Biden took office on Jan. 20, 2021, the stock market has posted robust gains. Since his inauguration, the S&P 500 has posted a 55% return. So far in 2024, the benchmark index has set 47 record highs.

On the campaign trail once again, Trump is reiterating the same claim from four years ago. In August, he told reporters that if Vice President Kamala Harris is elected, "We are going to have a crash and we're going to have a crash like a 1929 crash."

While Trump is known for deploying hyperbole, the market's performance remains an important issue among likely voters. To better understand how the outcome of the 2024 presidential election could affect stocks, here's a look at some of the sectors the candidates' policies could impact.

Energy stocks could benefit regardless of who wins

The S&P 500's energy sector could see a strong performance under either a Trump or a Harris presidency. In the second year of Trump's presidency, the U.S. became the world's top oil-producing country — rising above both Saudi Arabia and Russia — and has held that position ever since.

The former president has been clear about his stance on deregulation and expanding fossil fuel development. He pulled the U.S. out of the Paris Climate Accords during his first year in office and has pledged to "terminate the Green New Deal" if he reclaims the White House. The oil and gas industry has donated over $20 million to Trump during this election cycle, according to OpenSecrets, a nonprofit that tracks and publishes data on campaign finance and lobbying.

But despite Trump's vocal support for fossil fuels, energy performed the worst out of the S&P 500's 11 sectors in three out of the four years of his administration. (In the remaining year, it finished second-to-last.)

However, in spite of Trump's 2020 claim that Biden would "destroy the oil industry," America's fossil fuel output has boomed. According to the Energy Information Agency, the U.S. produced more oil in 2023 than any country has in history, and is concurrently the largest producer of oil and gas.

Harris has suggested she will continue Biden-era energy policies. In October, she said that while she remains committed to renewable energy initiatives, she would not pursue a ban on fracking, a controversial, high-pressure oil extraction technique that is responsible for almost two-thirds of U.S. oil production.

Under Biden's policies, which Harris is likely to carry over into her administration if elected, the energy sector has flourished. It was the top-performing S&P sector in two out of the past three years, posting a 54.6% gain in 2021 and a 65.7% gain in 2022.

Big Tech donors favor Harris

Unlike the fossil fuel industry, the tech sector has made sizable donations to the Harris campaign. The electronics manufacturing and equipment industry has given more than $19 million to the vice president's 2024 election bid, and internet companies have contributed $14 million. Google's parent company, Alphabet, alone has donated $4.7 million.

Some of the tech industry's enthusiasm is likely attributable to the Biden-Harris administration's CHIPS and Science Act, which increased investment in American semiconductor manufacturing, benefiting companies like Advanced Micro Devices, Broadcom, Nvidia and Qualcomm.

Initiatives like the CHIPS Act as well as the growth of AI have contributed to the tech sector's outsized market gains. Last year, the tech sector finished atop the list of S&P 500 sectors, posting a 57.8% gain. Through the first 10 months of 2024, tech has a year-to-date gain of 30.3% — just a hair shy of the top spot.

The S&P 500's information technology sector also performed well under Trump's presidency, finishing first among all 11 sectors three out of the four years of his presidency, including posting a 50.3% gain in 2019.

However, the former president has been a vocal critic of what he perceives to be monopolistic practices by Big Tech companies, with his administration having sued Amazon, Apple, Google and Meta over allegations that the companies violated antitrust law.

That sentiment has been echoed by his choice for vice president, Ohio Sen. JD Vance. In July, Reuters reported that Vance supports an antitrust crackdown on Big Tech, and that he has openly praised the work of Federal Trade Commission Chair Lina Khan in her pursuit of companies with anticompetitive practices.

Big Tech will likely have to contend with legal challenges regardless of who ends up in the White House, though, as Khan is a Biden appointee and could maintain her role under a Harris administration.

The financial sector supports Trump

Campaign contribution records suggest that the securities and investments industry — which includes hedge funds, investment banks, brokerage firms and mortgage lenders — has donated $203.5 million to the former president, versus $63.2 million for Harris, according to OpenSecrets, which provides an industry-by-industry breakdown of donors.

While Trump's 2017 Tax Cuts and Job Act permanently lowered the corporate tax rate from 35% to 21%, Harris' tax plan would raise corporate taxes from their current rate of 21% to 28%.

Similar to his plans for the oil and gas industry, Trump has pledged to deregulate the financial industry. Politico reported in September that during a speech to the Economic Club of New York, the former president promised attendees low taxes, low regulations and low interest rates, all of which have outsized impacts on companies operating in the financial services space.

Whether or not Trump's policies would be bullish for financial stocks under a second term is yet to be seen. But looking back at Trump's first term, the S&P 500's financial services sector had a mixed performance under his four years in office. Financials rotated between gains and losses every other year for an average return of 9.9%, which trails the sector's 14.56% average gain under the current administration.

Trump's agenda would aim to curtail the powers of financial regulators, similar to how he rolled back portions of the Obama-era Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in 2010 following the global financial crisis. Those rollbacks, which were well-received by Wall Street, allowed small and medium-sized banks to no longer be required to undergo stress tests, "leaving fewer than 15 big banks in the United States subject to stricter federal oversight," according to law firm Barclay Damon.

The bull market is poised to continue

Regardless of who occupies the White House in 2025, they will likely enjoy the ongoing bull market's momentum. The Federal Reserve is expected to continue lowering interest rates, with a cut at its next meeting on Nov. 6 all but assured. All other things being equal, lower yields on interest rate-sensitive investments like bonds and certificates of deposit could prompt investors to shift their money into assets like stocks and ETFs.

Surprisingly, election years aren't bad for stocks — despite investor sentiment often suggesting the opposite. The S&P 500 performs only slightly better in non-election years than it does during years with presidential elections, with an average annual return of 11.6% for the former versus an average annual return of 11% for the latter.

However, based on which candidate wins on Election Day, the market could see sector-by-sector discrepancies, resulting in outsized performances for some, and underperformance for others.

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