"Drill baby drill" (encouraging increased drilling activities for oil & gas) may not be favorable for oil prices, therefore, it will not benefit the profitability and stock prices of exploration and production (E&P) or integrated oil companies as it would for service companies. If more land is available for drilling, oil prices may further decline. The recent outstanding performance of exploration and production companies, the market has not yet considered the price narrative.

The red and blue (Republican and Democratic) positions differ, with Republicans more likely to support fossil fuels and unlikely to directly fund green transitions, such as new infrastructure like smart grids and energy storage (such as battery, fuel cell). Instead, their government spending is more likely to be used for old infrastructure like roads and bridges. Since May, the market has significantly favored the latter.

Citi has categorized the political sensitivity of green energy, with water (represented by the NASDAQ OMX U.S. Water Index) selected as the less politically sensitive, while solar energy (represented by the MAC Global Solar Energy Index) is the opposite. Solar energy may require direct government support and regulatory push to drive long-term stock performance improvement, while water is more driven by commercial demand and as a scarce resource, if managed properly, can have a near-term bottom-line impact on operations or risk reduction. Trump and the Republican Party are considered unfavorable to the former.

Regulatory relaxation: bullish for financial technology stocks, biotechnology companies

Trump's regulatory relaxation is widely seen as a positive for financial institutions, but the key driving factors for absolute returns include macro background improvements, such as lower interest rates, reduced recession concerns, and strong third-quarter performance.

Citi pays more attention to the difference in performance between regional banks and monetary center banks, with the former expected to gain greater momentum from looser rules and regulations.

If there is a Republican major victory or Trump's victory, a more favorable regulatory environment may boost smaller biotechnology companies, opening doors for large biotechnology/pharmaceutical companies.MergerThe market has not yet priced in this deal, the focus in the biotechnology sector remains on large caps, and more open capital markets would stimulate small cap biotechnology performance.

Compared with traditional financial institutions, financial technology has shown a sharp relative performance increase. Relaxing regulations may make disruptive business models or new challengers thrive more easily within traditional institutions. In addition, some credit card companies also fit Citi's definition of financial technology. In a more business-friendly environment, antitrust concerns may also be alleviated.

Inflation: Inflation, deficits, or increases, focus on materials, luxury goods, real estate stocks

Citi points out that both candidates are unfavorable for the stock market, but Trump's impact on long-term US deficits is more negative. This section of relative trading attention focuses on the potential impacts of higher rates and inflation.

These two factors often tend to impact the market's valuation end: value (indicators) and minimum volatility. Value includes many cyclical stocks, which may gain momentum in higher inflation, while their sensitivity to higher rates is often lower compared to minimum volatility stocks.

The next area of inflation trading focus is the cailiaohangye industry, with a focus on metal and mining companies, which benefit from the momentum of commodities and inflation. The increase in metal and mining industries prior to the election is more significant than that of value stocks.

Pay attention to the comparison between luxury goods consumption and consumer discretionary spending, ultimately driven by potential interest rate impact, followed by tax issues. Luxury goods and high-end consumers are usually not sensitive to interest rates, and perform better than other groups in the higher interest rate environment thought to be triggered by Trump's deficit increase. Conversely, Harris and the Democrats are more likely to raise taxes on high-income individuals. Indeed, higher taxes may affect savings more than spending, but this is still a potential negative factor for market reaction.

In terms of the housing market, pay attention to the Dow Jones U.S. Home Construction Index, which includes not only builders and material/component suppliers but also retailers. In the event of Trump's victory, higher interest rates are considered relatively negative from the financing perspective of most homebuyers (including new and existing homes). In the event of Harris' victory, some of her policies will provide direct support for first-time homebuyers, which should be advantageous for companies in the industry. Therefore, builders are highly sensitive to the policies of both parties.

Tariffs/Trade: Changes in tariff policies may impact technology and consumer stocks

In the event of a Trump victory, it is difficult to interpret the impact of tariffs and potential retaliatory actions, but the market will look for winners and losers in the early days after a Trump victory, and areas of relief if Harris wins.

Starting from the technology industry, focus on the comparison between software and services and hardware. Physical goods are more likely to be taxed, with hardware relatively seen as losers. Since May, software has been relatively leading, but the recent direction has become less clear. In terms of offshore trade, siasun robot&automation/industrial technology is more concentrated in small cap stocks, with a focus on USA operations.

In the consumer sector, attention is paid to the situation of physical goods relative to services. Consumer services may be more immune to the impact of trade conflicts, while durable goods and commodities are not.

Citi's "Emerging Markets in Developed Markets" (EM in DM) theme focuses on companies with high exposure to non-U.S. sales, especially in faster-growing emerging economies. Despite many companies being in growth-oriented industries, these stocks have underperformed this year. With a potential Harris victory, these stocks may see a relief rebound.

Taxation: Tax policy adjustments may affect financial, education, and retirement stocks.

Under any circumstances, there may be more proactive taxation of financial assets, or the Democratic Party may negotiate some tax increases to partially offset cuts at other income levels, bringing some headwinds.

In the education technology sector, there may be a "Musk Effect" relative to broader consumer spending. If the government strongly promotes efficiency, significantly reduces the Department of Education's budget, and shifts more responsibility to states or even local governments to handle, this could further drive the development of the education industry. Trump and Musk may prefer letting the free market address efficiency issues in education and other institutions.

Moreover, Trump seems more likely than Harris to cut taxes, although both seem to be making concessions on various taxes during the election process. Pay attention to Trump's proposal to eliminate the payroll tax, which would boost the elderly population and companies providing goods and services to them. Consumer stocks aimed at the elderly have outperformed the broader consumer sector this year.

The final relative trade is related to immigration policies. Trump's stricter immigration policies compared to the Democratic Party's may be a negative factor for urban population rebound, and companies associated with urbanization themes may become targets of this political outcome trade.