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Ask a Fool: How Would a Democratic President Affect Stocks?

By Matthew Frankel, CFP® - Nov 8, 2019 at 12:43PM

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What can you expect from your portfolio if we get a new president in 2020?

Q: Since President Trump took office, the stock market is up by about 50%. I keep reading how the market could crash if a Democrat wins the 2020 election, particularly one of the more left-leaning candidates. Would any stocks or industries be safe?

First of all, it's far too early to speculate. There are big differences among the current candidates, and there's also the variable of which party controls Congress. An Elizabeth Warren presidency with a Republican Congress would mean one thing -- with a Democratic Congress, it would mean something else entirely.

Plus, recall that many experts expected the market to plummet if Trump was elected, and we all saw how that turned out.

Having said all that, a Democratic president could be an overall negative catalyst for the stock market, at least initially, because some of the main reasons stocks have fared so well over the past few years are corporate tax cuts and a less-regulated business environment, and many of the Democratic candidates have indicated they want to change these things.

Some industries could be particularly hard-hit, especially if the Democrats regain control of the Senate. Several candidates have mentioned breaking up big tech companies like Facebook, and all have plans that would likely put pressure on the healthcare industry. Plus, the regulatory environment for financial and oil/gas companies would likely be significantly less friendly than it is now.

However, there are some stocks that could do quite well under a Democratic presidency. Alternative energy could thrive in a Democrat-controlled government, for example. Infrastructure stocks could also benefit, as investing billions (or even trillions) in this area is a popular idea among both parties. And if the winner is able to pass significant student debt relief, any business whose primary customer base is millennials could benefit.

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