If Americans were hoping for clarity on the night of the election, they were thoroughly disappointed. I know I was. Having been assigned to cover many of the nuances surrounding the 2020 election, that job was mighty difficult when you had confusion all across the board. Without a clear decision at time of writing, investors should prepare for risky stocks to watch (and possibly avoid) depending on who wins the election.
First, let’s set the framework. As of the early morning of Nov. 6, the Associated Press has Joseph R. Biden with 264 electoral votes. On the other hand, President Donald J. Trump has 214 votes. As you know, that could change dramatically, although it’s unlikely given the information that we have. Because of this lingering uncertainty, Biden is so close (winning Nevada or any other major state will seal it) yet so far.
So, why haven’t I just thrown my full weight on Biden and present risky stocks under his administration? First, the enthusiasm for President Trump was off the charts, with massive rallies occurring even in liberal strongholds. Second and more importantly, the incumbent received strong support from voters of color, despite, as the New York Post stated, rampant accusations of Trump’s racism.
This at least gives some credibility to Trump’s charges of voting irregularities. Listen, I’m not saying one way or the other. Instead, I’m just letting the process play out. However, the margins are so tight in many of these states that I wouldn’t mind the President contesting the results through legal channels. Frankly, the American people deserve to know the full truth so we can put this madness behind us.
Moreover, NBC News — you know, the evil, liberal “fake news” agency — has not yet called Arizona for Biden. Therefore, at time of writing, NBC is only comfortable reporting that Biden has 253 electoral votes, not 264. Here’s the obvious wrinkle — Arizona is traditionally a conservative stronghold, although changing demographics might have pushed it blue. If not, though, Trump could conceivably have a better shot at winning a second term. And that makes these risky stocks to watch a real mess indeed:
- Mobile Telesystem (NYSE:MBT)
- Qiwi (NASDAQ:QIWI)
- Occidental Petroleum (NYSE:OXY)
- Delta Air Lines (NYSE:DAL)
- Nio (NYSE:NIO)
- Tencent (OTCMKTS:TCEHY)
- General Electric (NYSE:GE)
- Mosaic (NYSE:MOS)
Finally, bear in mind that even if Biden is declared the victor by the time you’re reading this, it’s probably not over. Not by a long shot if I know anything about President Trump. If any of the wild conspiracy theories have an inkling of truth — and I’m not discounting anything in this crazy year we’ve had — then we can still have four more years. That’s why you should approach these risky stocks with an abundance of caution.
Risky Stocks Under Biden: Mobile Telesystem (MBT)
Even without the U.S. elections drama, Mobile Telesystem was already one of the most questionable plays among risky stocks. True, MBT stock is levered to the leading telecommunications company in Russia and the Commonwealth of Independent States (CIS). Further, the company serves “over 80 million mobile subscribers in Russia, Armenia and Belarus,” according to its website.
But that’s also the problem with MBT stock at the moment. As you’ve heard, Armenia is engaged in a hot conflict with Azerbaijan. Obviously, that means business and the economy is on the backburner as the two sides continue a feud that the New York Times describes as an ethnic tinderbox.
If that wasn’t enough, a Biden administration would probably be net negative for Russian companies. According to Foreign Policy, most Russians are concerned that the former Vice President would bring a chill to U.S.-Russian relations. Given how much Biden has criticized Trump as someone who flirted with dictators, that concern is not completely unjustified.
On the surface, the Russians state that they don’t care who wins the presidential election. It’s not a sentiment I would dismiss offhand. Indeed, with the fracturing of public discourse in America, Russian disinformation agents have already won in a sense. But that doesn’t mean risky stocks from Russia, such as payment service provider Qiwi, are exempt from volatility.
Interestingly, QIWI stock recovered quite well from the March doldrums caused by the disruption from the novel coronavirus pandemic. But momentum petered out in August, with shares spiraling into a bearish trend channel. Then, on Nov. 4, the stock bounced higher as it briefly appeared that Trump would win.
Now, the mood has likely shifted toward the bearish end of the spectrum for QIWI stock. For one thing, the post-election bullishness wasn’t enough to break out of the declining trend channel. More critically, a Biden administration probably won’t be favorable for U.S.-Russia relations.
Occidental Petroleum (OXY)
Prior to the pandemic, Occidental Petroleum deserved a place among risky stocks for its pricey deal to acquire Anadarko Petroleum. At $35.7 billion, it was a bitter pill to swallow for stakeholders. But when the coronavirus came to town, the acquisition became unfathomably horrendous. Not surprisingly, OXY stock is one of the ugliest players in a hideous sector.
But under a Biden administration, Occidental will probably carve out a new niche of ugliness for risky stocks. You might be thinking that I’m referring to the Biden Plan, which calls for our economy to become net-zero emissions by 2050. Although it’s a political threat to OXY stock, it lacks fundamental substance. There’s no way we could just eliminate fossil fuels at the rate of integration for clean energy sources.
Instead, I think Occidental is risky because it appears that the Republicans will maintain control of the Senate. And that would likely mean the right will not want to play ball with Biden, leaving him basically as a puppet leader unable to pass measures such as stimulus bills. That will hurt consumer demand, which in turn will hurt OXY.
Delta Air Lines (DAL)
One of the most gut-wrenching consequences of this economic crisis has been watching airline professionals tearfully thank passengers on their last journey before facing an unknown employment market. Through no fault of their own, these hardworking individuals have lost not only a source of income but direction.
Unfortunately, I believe that the airliner industry would be classified among the risky stocks to avoid if Biden wins the election. Frankly, that will impact Delta Air Lines. While a positive light in terms of keeping the middle seat blocked out longer than the competition, this consumer-friendly action doesn’t help the bottom line. The reality of the new normal dictates caution toward DAL stock.
But as I mentioned above with Occidental, a Biden administration will have trouble passing stimulus bills to support various industries. Cynically, the Republicans have zero incentive to make the Democrats look like heroes. And that probably means DAL stock will hit some turbulence.
Risky Stocks If Trump Wins: Nio (NIO)
I want to be clear from the get-go: from where I stand, Joe Biden has a much clearer road to the White House. Nevertheless, you still don’t want to count out President Trump, especially in this wacky year we’ve had. Therefore, if the incumbent wins a second term, you should probably add Chinese companies to your list of risky stocks, and I’ll begin with Nio.
As an electric vehicle manufacturer that currently operates exclusively in China, NIO stock is theoretically insulated from geopolitical implications. However, that might be a naïve way of thinking, considering that much of China’s economy is dependent on exports. Certainly, robust trading relationships have fostered high-paying jobs that could be under threat. Now that would threaten Nio, China exclusive or not.
Further, InvestorPlace contributor Faizan Farooque made an excellent point that the multiple of NIO stock well exceeds that of EV leader Tesla (NASDAQ:TSLA). Some might counter that the premium is justified. However, that argument would be less credible under an aggressive Trump administration.
Due to rumblings in the capital markets, Tencent recently took the mantle from Alibaba (NYSE:BABA) for the most valuable Chinese company. On the surface, it’s not hard to see why. With the raging novel coronavirus pandemic, the mobile gaming business underlining TCEHY stock received tremendous demand. As China is one of the first countries to supposedly recover after one of the major epicenters of Covid-19 (in this case, the epicenter), Tencent may have a long upside pathway under a Biden administration.
But if Trump pulls a miracle, watch out! Rather than a high-conviction buy, you would at that point consider TCEHY as one of the risky stocks to avoid.
Frankly, the Trump administration hasn’t held back any punches regarding its disdain for the Chinese government. At every opportunity, the President has laid blame squarely on China, even threatening to make the country pay. That kind of language sends a chill, especially because that’s not how diplomacy works.
More critically, if Trump wins, the Chinese could expect further aggression from the White House. A second-term president has nothing to lose, which would be dangerous for anyone on “The Donald’s” hit list.
General Electric (GE)
For years now, General Electric was easily one of the risky stocks to avoid, and with ten-foot pole if you had one available. From multiple angles, whether it be the financial instability, bad business decisions or its terrible PR, GE stock simply hasn’t inspired confidence. But the one bright spot was the underlying aviation business unit.
Of course, the coronavirus cruelly took that away too. So, GE stock really is dependent on many variables, including the outcome of this election. Clearly, since aircraft and parts represent some of the leading exports from the U.S. to China, General Electric is angling for a Biden win. But if Trump snatches victory instead, I can’t think of a way in which this wouldn’t be bad news for GE.
As many have pointed out, many things need to go right for the once-proud industrial giant to recover. Coincidentally, President Trump needs to sweep the floor with the available states to get a second term. But if he does, I wouldn’t bet on GE because our relations with China will likely sink in the toilet.
If there’s one company that’s clearly on the list of risky stocks should Trump prevail against the “evil,” ballot-dumping Democrats, it’s Mosaic. Back in 2019, MOS stock lost very roughly a third of its value. Yes, you can blame unfavorable weather conditions but who are we kidding? What Wall Street was really worried about was the U.S.-China trade war.
As well, you can tell how important good relations are for MOS stock by looking at the charts. It wasn’t until the ice started to thaw between the world’s top two economies that the volatility in Mosaic shares started to subside. Then, the novel coronavirus came to town and all that goodwill vanished in a heartbeat.
Although it looks like Biden will be victorious at the end of this unprecedented election cycle, that hasn’t stopped traders from signaling anxiety in Mosaic shares. Honestly, who could blame them? President Trump has all but promised to hold China responsible for the coronavirus. As I said before, he would have nothing to lose in a second term.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.