How Stocks Are Reacting To The 2020 Election Cycle

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

With about one month until the 2020 national election, the stock market is in a state of flux and traders are weighing their options about where to put their money as volatility picks up in the approach to November 3. While equity is still broadly appealing, with the S&P 500 still within striking distance of its all-time high, the typical market leaders have yet to mount a convincing comeback from September’s bout of heavy selling, and the rest of the market is feeling the pressure.

Although the ongoing global pandemic has played a key part in impacting the market at large, that crisis has been given a new dimension with the potential uncertainty represented by the upcoming national election. Not only will the final results of the absentee and mail-in voting process likely take weeks or even months to derive, but the potential of a contested election means the results will also occupy the Federal government from acting on other pressing issues like enacting further business stimulus or orchestrating its response to COVID-19.

This uncertainty has made the performance of the market and individual equities extremely difficult to anticipate. Using artificial intelligence and predictive analysis tools, trading platform VantagePoint will be analyzing this unpredictability among several stocks in an upcoming live demonstration of its software.

Prior to this virtual demo, and with only weeks until the actual election day, let’s take a look at some of the key market constituents that are currently feeling the impact of the 2020 election cycle what might be in store for them in terms of further volatility or opportunity.

Big Tech’s Big Risk

Perhaps the most telling indicator of the market’s current atmosphere of unknowing, major tech and internet components like Apple Inc. AAPL, Facebook, Inc. FB and Amazon.com, Inc. AMZN have wavered through recent weeks after a dramatic post-earnings spike.

Although the perspective among market analysts and commentators is that the tech segment was letting off steam following its path to precipitous new highs, the segment has so far been unable to recapture the same enthusiasm it saw through the summer. Despite being unable to break out of this trough, these stocks have fluctuated wildly from one day to the next, with Apple seeing daily swings of ±3% and Amazon experiencing ±5% in the waning days of September.

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While it’s not impossible to imagine big tech finding new life in the weeks leading up to the election, the industry has been a big target for potential scrutiny and controversy in the public sphere given the array of political issues that have surrounded the major players in recent years.

Foreign election meddling and data collection threw a pall over Facebook share in the aftermath of the 2016 elections, and questions of anti-consumer and anti-competitive behavior within the tech sphere have only become more prevalent, particularly among the Democratic party which is seen as potentially making big gains in November according to consensus polling data.

Threats of regulating or breaking up tech giants like Facebook, Amazon or Google parent company Alphabet, Inc. GOOG GOOGL have been floating around Washington D.C. for months. Although the actual implementation of any regulation would likely be slow in coming should Democrats have a strong showing, that alone might be enough to spook Wall Street in the weeks surrounding the election.

Looking For Leaders

Because of the volatility that has persisted in the tech segment and the uncertainty that lies ahead, the broad market has been bereft of decisive leadership through September.

The pharmaceutical and biotech space was previously another area of strength in the market through the summer months as a result of the ongoing race for a safe and effective vaccine for COVID-19. However, the healthcare sector has been muted through September, with mixed unclear messages about the progress trials from Moderna Inc. MRNA and Johnson & Johnson JNJ.

With potential news of the Pfizer, Inc. PFE vaccine trials expected just days before the election, the sector could see either political party latch onto the news and spur greater speculation in the sector.

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But even though the market is struggling to find direction as the election looms, there are isolated segments of the market that have been resilient to volatility impacting higher-profile industries. Delivery companies in the transportation sector like FedEx Corporation FDX and UPS, Inc. UPS have surged due to rising shipping rates, while retail stocks like Walmart Inc. WMT and The Kroger Co. KR benefit from consistent consumer trends.

What these industries have in common is that they are largely agnostic in relation to the threat of a contentious or contested election, and traders have so far put their faith in their continued resilience. While the coming weeks and months will likely provide further surprises for these industries and the market at large, traders may be able to find opportunity in the confusion by looking to overlooked areas of the market and leveraging technology to cut through the daily market noise.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.