ACG Insights: Politics and Investing

(Download the full report HERE)

Executive Summary

  • The impact of politicians and their policies can often be counterintuitive 
  • Oil & Gas stocks may be beneficiaries of constrained production 
  • Tesla may not benefit from pro-EV government policy going forward

Introduction

Campaigning for the U.S. presidential election has commenced in earnest as we move into the summer months, with Joe Biden and Donald Trump potentially looking at a rematch of the 2020 election. It should be noted that broader markets tend not to care much about the results of elections over longer timeframes like presidential terms. Stock markets in aggregate care much more about earnings and broad economic trends than idiosyncratic legislative agendas. The party in power can certainly impact underlying sectors, industries, and companies in different ways that may not be intuitive. Biden’s and Trump’s terms in office should give some insight as to how their agendas may or may not help underlying areas of the market as well as their respective policy preferences. However, the impact of politicians and their policies can often be counterintuitive. The table below summarizes a few industries that will be of interest to investors as we move toward November due to these potential policy impacts. Following the table, we provide a closer examination of some areas worth paying greater attention to as we approach election day. Oil and gas stock performance can differ substantially based on economic policy, electric vehicle policy can substantially impact the success of companies like Tesla, and the performance of other commodities may well depend on how strongly electric vehicles are promoted. 

Download the full report HERE where we discuss:

  • Oil and Gas
  • Profit Margins versus Volume
  • Electric Vehicles and Related Industries
  • The EV Market
  • A Commodity Supercycle?

Sources:

  1. S&P Global Data 
  2. Reuters https://www.reuters.com/business/energy/big-oil-doubles-profits-blockbuster-2022-2023-02-08/
  3. WSJ https://www.wsj.com/politics/donald-trump-elon-musk-alliance-d1fe43e3
  4. WSJ https://www.wsj.com/business/autos/tesla-elon-musk-glass-house-doj-sec-investigation-c723166b
  5. Open EV Charts https://open-ev-charts.org/
  6. Goldman Sachs, Fortune.com https://fortune.com/2023/06/29/no-recession-evidence-oil-price-outlook-goldman-sachscommodity-supercycle/
  7. IEA, https://www.iea.org/data-and-statistics/charts/minerals-used-in-electric-cars-compared-to-conventional-cars
politics and investing