The 2020 U.S. presidential election is setting up to be one of the most contentious in history.
In a year characterized by a pandemic that's killed more than 200,000 Americans, an economic crash and recession, social unrest as bad as anything in 50 years, and now a fight over a Supreme Court nomination just weeks before the election, it seems that anything could happen on Nov. 3.
Perhaps because of these issues (or for other reasons), former Vice President Joe Biden is leading in many polls and many say he has a strong chance to win the election and replace President Donald Trump in office. Investors can't ignore the influence of changing political leadership on the economy and on stocks, nor should they forget that the stock market often tends to be volatile around elections. In 2016, for example, several stocks initially sunk on news of Trump's victory, but then rallied strongly through Inauguration Day in early 2017.
Keep reading to see four stocks that could fall if Joe Biden wins the presidency.
Yandex (NASDAQ:YNDX) is Russia's leading search engine and ride-hailing provider, and the stock has gained 252% since President Trump won the 2016 election. Though the company is struggling during the coronavirus pandemic, with revenue sliding in the second quarter on a dollar basis and a reported loss after a profit a year ago, the stock is actually up 52% so far this year. This may be because investors believe the tech stock is gaining market share during the crisis.
However, a Biden administration is likely to be negative for the Russian economy. President Trump has been notoriously soft on Russia and its President Vladimir Putin, despite solid reports of Russia's role in manipulating the 2016 election and more recent aggressions like putting a bounty on U.S. soldiers in Afghanistan.
If Biden is elected, Russia is likely to face some kind of consequence for its actions, including potential economic sanctions. Yandex, as a diversified growth stock, would feel the impact of any kind of extended recession. Given the stock's recent surge despite challenges from the pandemic, it may be due for a pullback anyway.
2. PPL Corp.
Biden has promised to make a big push for green energy. President Trump, on the other hand, has been generally hostile to renewable energy and has instead promised to revive the coal industry (something that has not happened under his tenure). As part of his green energy plan, Biden wants to "move ambitiously to generate clean, American-made electricity to achieve a carbon pollution-free power sector by 2035." That's likely to be a problem for a number of utility operators, especially those most reliant on heavy fossil fuels.
PPL (NYSE:PPL) is a utility holding company that delivers electricity and natural gas in parts of the U.K. as well as Pennsylvania and Kentucky. It had the highest pollution rate of any publicly traded utility in 2017, with 2,012 pounds of carbon dioxide emissions per megawatt-hour produced, according to M.J. Bradley & Associates, an environmental consulting firm. New standards under a Biden administration could force utilities like PPL to spend extensively on updating power plants and to generate more of its power from renewable energy instead of fossil fuels, which would weigh on the stock.
3 and 4. GEO Group and CoreCivic
GEO Group (NYSE:GEO) and CoreCivic (NYSE:CXW), two private prison stocks, were expected to do well under President Trump. In fact, both stocks surged after he was elected on anticipation that he would pull back the Obama administration's order to move away from using private prisons, something Trump did shortly after the inauguration.
Nonetheless, both stocks have declined significantly during the Trump administration as prison populations have continued to decline as well. Still, a Biden administration is likely to be more difficult for private-prison operators for at least one reason. These companies hold many of the contracts to operate the Immigration and Customs Enforcement (ICE) detention centers that hold foreign nationals that have crossed the border illegally. This issue has been a flashpoint for Democrats in recent years, and Biden has promised to "end prolonged detention and reinvest in a case management program." That would likely take away business from GEO Group and CoreCivic, and other policies could threaten these two stocks as the administration reverts to the previous policy under President Obama.
Other issues to watch
Citizen and corporate tax rates could change under Biden as well. The Democratic candidate has said he would raise certain taxes on the wealthiest Americans and raise the corporate tax rate from 21% to 28%, which has the potential to affect virtually all stocks depending on how the legislation is written. Similarly, the tariffs that the Trump administration has imposed on China, which have weighed on the retail industry, could be reversed, though Biden has not released his plan for trade with China or what his tariff policy would be.
Whatever happens, the election is likely to shake up markets one way or another. Keep an eye on further comments regarding the economy from the Biden campaign as Nov. 3 approaches.