Which sectors would win in a clean sweep of the Republicans in the US election? Author: Investing.com

As the United States prepares for the upcoming election, market watchers are assessing the potential impact of a clean sweep by the Republicans. According to UBS economists, some sectors are poised to benefit significantly from such an outcome due to anticipated policy changes, regulatory shifts and economic trends.

For example, the financial sector is expected to be the biggest beneficiary if the Republicans win. Historically, the sector has thrived under Republicans, thanks to deregulatory policies and strong economic growth.

The economists said the financial sector would benefit from “less regulation, stronger nominal GDP, a steeper yield curve and increased merger and acquisition activity.”

“Finance performed best after the 2016 election, and second best after the Trump/Biden debate and assassination attempt,” they added.

Cyclical sectors, particularly industrials and energy, are also expected to perform well. These sectors typically benefit from economic expansion and deregulation.

“Industry benefited across the board,” economists said. “Energy fared poorly after the 2016 election but was the best after the debate and attempted coup.”

Materials, alongside energy, could also benefit from reduced regulatory constraints. Fewer drilling regulations and other environmental constraints could provide a significant boost.

On the other hand, the impact of discretionary decisions was smaller after the 2016 elections.

Trump has advocated for a “most favored nation” approach to pharmaceutical pricing, which poses a challenge for the health care sector, according to UBS. But some companies, notably Humana (NYSE:) and UnitedHealth (NYSE:) could benefit from changes to insurance regulations.

The technology sector, while not particularly sensitive to election results, could maintain its stable performance. UBS points out that the industry is “neither economically sensitive nor highly regulated.” As such, it may not experience significant disruption or benefit from the election results, continuing its trend based on broader markets and technological innovation.

In terms of investment style, value stocks are expected to outperform growth stocks in a Republican victory scenario. UBS explains that “low P/Es have led stocks following the Trump election and recent events.”

“While financials and cyclicals tend to have low P/Es, our calculations are sector neutral. In other words, low P/E stocks outperformed the groups,” the economists added.

On the other hand, high-growth stocks were largely unremarkable following the 2016 election and have underperformed in the face of recent events.

The S&P 500 rose 21.5% in the year following Trump’s surprise 2016 election victory. However, the “Trump trade,” characterized by sector and factor leadership, lasted only for a month after the election.