Guosen Securities released a research report stating that if Trump is re-elected, at least three changes are worth paying attention to, and the structure of the US stock market may face changes again. First is Trump's attitude towards technology giants. Unlike the "governing by Twitter" in the previous term, Trump's relationship with technology giants has clearly deteriorated following the "Capitol Hill incident". Second, during the Biden era, the US diplomatic situation was difficult and the Republican Party had a strong demand to strengthen the US defense industry. Third, the US seems to have weakened its control over the global geopolitical situation, and other economic entities outside the US have increased their attitudes towards the geopolitical situation and their impact on energy prices.

And with technological progress, the importance and urgency of preventing a technology enterprise from excessively controlling data to harm national security or engage in power struggles between major nations is also rising. Second, during the Biden era, the US diplomatic situation was difficult and the Republican Party had a strong demand to strengthen the US defense industry. Third, the US seems to have weakened its control over the global geopolitical situation, and other economic entities outside the US have increased their attitudes towards the geopolitical situation and their impact on energy prices.

Guosen Securities' main points are as follows:

The US election is the focal event of 2024. In fact, reviewing the performance of the US stock market during the presidencies after the Cold War, it is not difficult to find that the political tendency of the president often has an important impact on structural changes in the US stock market. There have been several relatively obvious changes at least.

First, after the Cold War, as the confrontation among major powers decreased and Clinton reduced military spending to balance the budget, military industry stocks fell relatively in the 90s, but began to outperform again after the rise in counter-terrorism demands in the 2000s.

Second, the financial liberalization that began in the 1970s began to gradually accelerate in the late 1980s, until Clinton's tenure clearly allowed mixed ownership, and the loose financial regulatory environment was also maintained during the Bush administration, driving financial stocks to have sustained excess returns from the 90s until before the subprime crisis. However, the subprime crisis and Obama's regulatory "turnaround" eliminated the sector's trend of excess returns.

Third, after the Cold War, US technology stocks experienced two periods of uptrend. One was during the Clinton period, when the civil-military integration of military technology promoted the popularization of household computers and internet technology. The second started from Obama's second term until now, with the evolution of the internet from the computer end to the mobile phone end, and the breakthrough of AI in recent years. And this industry trend was strengthened during the Trump and Biden eras, which is related to their persistent crackdown on competitors and the latter's strengthening of industrial policies.

Fourth, global energy prices and US energy stocks are clearly influenced by geopolitical factors, and hence by the foreign policies of US presidents. During Obama's second term, US-Russian relations deteriorated sharply, and the Ukrainian crisis in 2014 was an important turning point. The US initiated a series of economic sanctions against Russia and pursued a "weak Russia" policy, causing oil prices to plummet and energy stocks to underperform. Starting from the Biden era, geopolitical conflicts have intensified, manifesting as armed conflicts, and energy stocks have again shown excess returns.

The recent Trump shooting event has increased his chances of being elected. If Trump is re-elected, at least three changes are worth paying attention to, and the structure of the US stock market may face changes again. First is Trump's attitude towards technology giants. Unlike the "governing by Twitter" in the previous term, Trump's relationship with technology giants has clearly deteriorated following the "Capitol Hill incident". And with technological progress, the importance and urgency of preventing a technology enterprise from excessively controlling data to harm national security or engage in power struggles between major nations is also rising. Second, during the Biden era, the US diplomatic situation was difficult and the Republican Party had a strong demand to strengthen the US defense industry. Third, the US seems to have weakened its control over the global geopolitical situation, and other economic entities outside the US have increased their attitudes towards the geopolitical situation and their impact on energy prices.

Risk Warning: Domestic and foreign economic policies are uncertain, there are geopolitical risks, and global economic and financial risks.

Editor/ping