Image source: Getty Images
In less than two weeks, our friends across the pond will go to the polls as part of the US presidential election. Investors around the world will be watching the outcome, as it will increase volatility in the stock market. Here are two UK stocks that I think could do well, depending on which candidate is chosen.
Demand-driven inflation
If Donald Trump wins, I think so HSBC (LSE:HSBA) could do very well. The global banking giant operates in the US, mainly in the corporate and investment banking segment.
Some of Trump's policies focus on lowering the corporate tax rate and imposing tariffs on trading partners. Both of these can help increase inflationary pressure in the economy, but also stimulate domestic growth.
HSBC should benefit from this in two main ways. First, higher growth should see its operating businesses become more active, including transactions, lending and mergers and acquisitions activities. This should increase revenue. Second, if inflation rises, interest rates may have to remain high for a long time. This should benefit HSBC as it will make more interest income if this happens.
Another risk is that HSBC operates in more than 60 countries. Therefore, even if the US division does well in the coming year, it may not have much impact on the share price. The stock is up 11% over the past year.
Infrastructure investment
If Kamala Harris wins, Balfour Beatty (LSE:BBY) could benefit. The construction and engineering company is involved in several infrastructure projects in the US, such as the Port of Long Beach, which is part of the larger $2bn Middle Harbor project.
Although the stock is already up an incredible 50% in the past year, I think it could continue in the coming year based on the election results. That's because Harris is committed to investing in more infrastructure projects, as well as maintaining a pipeline of deals approved by the current Biden administration.
Interestingly, the company's half-yearly report showed that US construction revenue was $188m higher than UK construction revenue for the same period. This shows that if things continue in the US, it could materially help to increase profits.
Indeed, this is a very competitive place to be. I think more companies will enter into future projects when they come online, which could reduce Balfour Beatty's profit margins.
I am not trying to predict who will win the election. Instead, I will wait and see what happens. Depending on who wins, I think said stock could do well over the next year or so. So, I'm putting both on my watch list and patiently waiting for the coming weeks!
Source link
