For better or worse (we’ll let you decide), if Vice President Joe Biden wins the 2020 election, US policies will change significantly and this could have a big impact on investment opportunities. According to the polls, Biden is ahead by a comfortable margin but as we saw in 2016, polling does not determine elections. Candidates aside, stocks hit record highs during President Trump’s term because Republican policies are good for equities. Democrats tend to be less friendly to corporate America and some economists argue that it could be the catalyst for a steep market correction. However historically the data says otherwise, stocks actually perform better with a Democrat in the White House than a Republican. Since 1945, the S&P 500 rose an average of 11.2% with a Democratic President compared to 6.9% with a Republican. As you can see, predicting how the broader market responds to a Biden win can be tricky but even so, there are some great investment opportunities ahead regardless of how the market performs..

1) Sell Britain

One of the most obvious trades is to sell the British pound. Biden has made it clear that there will be no trade deal with the UK unless they respect the Good Friday Agreement and prevent the return of a hard border. This is also a key issue dominating EU-UK Brexit talks. The British government had hoped for favorable individual trade agreements after leaving the European Union and Biden has made it clear that the US will only provide one if they can reach a deal with the EU. Throughout his term, President Trump supported Prime Minister Johnson’s plan to leave the EU and promised a “fantastic and big” trade deal. He’s remained positive even as talks between the EU and UK deteriorate. There’s no doubt that Biden will be harder on Britain than Trump and for this reason, the British pound could be a great sell on a Biden victory. Between Brexit, a second virus wave, and the return of some business restrictions, we could easily see a 2 to 3% correction.

2) Long Infrastructure and Green Energy

Two of the cornerstones of Biden’s campaign policy is infrastructure spending and green energy. Regardless of who wins, recovering the economy is one of the top priorities. Trump favors lower taxes and fewer regulations while Biden’s plan calls for higher taxes on the wealthy and corporations along with trillions of new investments in infrastructure and clean energy. The hope is that this would create millions of new jobs for the lower and middle class as they contribute to upgrading the nation’s roads, bridges, and highways. He also promised to reverse all of President Trump’s decisions to ease environmental regulations. TESLA would be one of the biggest beneficiaries. They are known for their energy-efficient cars but it’s their battery technology that provides the most exciting opportunities. Caterpillar was a name that we said would benefit from a Trump victory but as one of the nation’s largest providers of construction and mining equipment, CAT will also be a big player in Biden’s plans to rebuild America’s infrastructure.

3) Short S&P 500

This is probably one of our most questionable views but in the near term especially right after the election, we are confident that equities will see a correction, especially if the results are close and President Trump refuses to concede easily. Investors hate uncertainty and the prospect of weeks of ballot counting could lead to a sharp and aggressive correction in overvalued stocks. Almost immediately, economists will talk about the prospect of higher corporate taxes and increased regulations for the banking and energy sectors. We still believe that stocks will outperform in the long run after a Biden victory as global uncertainty eases and diplomacy with other nations improves, but in the short term, a Biden win should trigger a sharp and aggressive correction in equities.