(Bloomberg) -- It’s tempting to view a Republican sweep of the White House and Congress as a clear bullish signal for stocks and a Democratic win as a sell. Think again, say Bank of America Corp. strategists.
The impact of the US presidential election will be more nuanced, with the potential to “make or break sub-sectors” of the stock market, the BofA team including Savita Subramanian wrote in a note to clients.
A Republican sweep is typically seen as most positive for small caps, but Donald Trump’s promised immigration clampdown could also constitute a risk for smaller business that rely on immigrant labor. Renewable energies or electric vehicles could also be under pressure if Republicans hold both the executive and legislative branches, they said.
On the other hand, a possible TikTok ban under a Democratic administration could be positive for US online media companies, they added.
The race between both candidates is tightening and campaign officials and political operatives are anticipating a jump-ball election, decided at the margins in seven battleground states.
BofA strategist Michael Hartnett said in a separate note last week that investors have started ramping up assets which had thrived in the wake of Trump’s 2016 victory.
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