Fintech Network News, October 22 (Editor Liu Rui): As the U.S. election approaches, Wall Street's attention to the U.S. election is increasing day by day. Many investment banks have been predicting and analyzing recently, the different results of the U.S. election may cause what kind of market impact.

However, recently, Bank of America released a report stating that the outcome of the November U.S. presidential election is unlikely to have any impact on the trend of U.S. stock prices. Bank of America strategist Savita Subramanian stated that, in fact, the U.S. stock market rarely cares about which political party will control the White House. Instead, investors' focus should be entirely on corporate profit growth.

"Profit growth acceleration is far more important than who sits in the oval office." Subramanian wrote in the report.

Is the U.S. election result insignificant?

The view by Bank of America is somewhat surprising: how could the outcome of the U.S. election not affect the market given that U.S. election results often determine the policy direction of the U.S. government for the next four years?

Bank of America strategist Savita Subramanian explained that many targeted policies proposed by U.S. politicians often have actual impacts on an industry that are contrary to investors' expectations - meaning that predicting the market impact of the next four years based on election results is often inaccurate.

For example, when Donald Trump took office in 2017, due to his friendly stance on oil drilling, the market considered energy stocks as potential winners during his term, while renewable energy stocks were seen as potential losers.

However, during Trump's actual presidency, the USA energy sector was the worst-performing sector: during his term, despite the S&P 500 index surging by 83%, the energy sector plummeted by 29%. At the same time, according to YCharts data, the clean energy industry sector grew by 306% during President Trump's term.

However, there was a complete turnaround after Trump's term ended and President Joe Biden took office: when Biden took office in 2021, due to Democrats generally being unfriendly to oil companies, many investors believed that the traditional energy industry might become a loser, while clean energy stocks were seen as potential winners.

The actual situation, however, turned out to be the exact opposite: during Biden's term, traditional energy stocks consistently outperformed, rising by 139%, while the clean energy sector was the worst-performing, falling by about 55%.

"Even guiding policies can sometimes produce results opposite to expectations," Saburamani said, "there are many subtle differences."

The importance of company earnings far outweighs elections.

In light of this, Saburamani expects that this time, investors' expectations of how the presidential election outcome will impact the stock market may once again fall short.

For example, if the Republicans sweep the White House and Congress in this election, achieving an overwhelming victory, investors may initially view this as favorable for Tesla stocks because Tesla CEO Musk enthusiastically supported Trump and the Republican party. However, this could also be a negative factor as tax credits for electric vehicles may face the risk of being revoked.

It is for this reason that Saburamani believes that there is no need to overly focus on the results of the US election—because the impact on the market may be very limited, and even completely contrary to expectations.

Ultimately, Sabulamaniya and her team expect that regardless of who wins in the November elections, the US stocks will rise in 2025, as she expects the s&p 500 index constituents' next year's eps to grow by 13% year on year, and profit growth has always been the biggest driver of stock market gains.

"Profits are more important than politics," Sabulamaniya said.

Editor/Lambor