Rising from behind? How to invest in the "Kamala Harris Trade"?

After Biden announced his withdrawal from the race, current Vice President Kamala Harris became the Democratic presidential candidate. The "latecomer" Harris saw a rise in her poll numbers; according to the RCP poll as of September 2, Harris had a probability of winning of 48.1%, leading Trump's 46.2%.

In the upcoming debates from September to October, presidential candidates will participate in several debates to showcase their policy proposals and debating skills. If Harris performs excellently in the debates, she may further expand her advantage. This article will summarize Harris's policy context and potential opportunities.

Reduce the cost of living.

At the rally on the 16th, Harris introduced the much-anticipated housing policy.

She stated that a subsidy of up to $0.025 million would be provided for first-time homebuyers, and 3 million new homes will be built during her first term. Builders constructing homes for first-time homebuyers will also receive tax benefits. Additionally, legislation will be enacted to combat malicious rent hikes. These policies are expected to assist over 4 million first-time homebuyers in the next four years.

In an environment of high inflation and high interest rates, the U.S. faces a shortage of housing, continuously rising home prices and rents, as well as persistently high mortgage rates.

According to Zillow statistics, the overall housing costs have risen by 110% in the past five years, rents have increased by 35%, and home prices have risen by nearly 50%. Research from the Atlanta Federal Reserve also shows that housing affordability has significantly worsened across the U.S. in the past two years.

If this policy can be successfully implemented, housing developers are expected to benefit. The National Association of Home Builders issued a statement welcoming it after Harris announced her policy.

However, it is worth noting that these companies have been profiting significantly in an environment of high housing prices. Industry leaders $D.R. Horton(DHI.US)$、 $Lennar Corp(LEN.US)$ and others have achieved more than double growth over the past two years. The two major Industry ETFs tracking U.S. construction companies $iShares US Home Construction ETF(ITB.US)$ and $SPDR S&P Homebuilders ETF(XHB.US)$ have also surged accordingly.

This policy has also sparked some controversy. According to estimates from the nonpartisan research organization "Committee for a Responsible Federal Budget," Kamala Harris's economic plan will lead to a net deficit increase of $1.7 trillion over ten years, and if housing policies are made permanent, this figure could rise to $2 trillion. Former Trump economic advisors also stated that providing home purchase subsidies will not only fail to alleviate high housing prices but will also further increase inflation and damage the economy.

In terms of food and daily necessities, Kamala Harris will also work to promote the first federal legislation in U.S. history to ban price fraud, including authorizing government agencies to investigate and penalize violating companies while intensifying punishment against hoarding and price gouging.

Crypto-friendly.

Although Kamala Harris did not personally endorse like Trump, the Democratic Party also maintains an open attitude towards Cryptos. Senate Majority Leader and senior Democrat Chuck Schumer stated at a virtual currency forum held in August that he believes in the future of Cryptos, and it is possible for the Senate to pass favorable regulatory reforms for Cryptos within the year.

The market also expects Kamala Harris to take a more moderate stance than Biden. Under Biden's leadership, the SEC has initiated several enforcement actions against Cryptos, claiming that Crypto tokens and their operators should comply with securities laws. According to the Financial Times, advisors to Harris's campaign have reached out to top Crypto companies to restart the relationship between the Democratic Party and the Crypto industry.

$Coinbase(COIN.US)$ CEO Armstrong believes that supporters of Cryptos are becoming an important voting bloc, and both parties have noticed this, highlighting the increasing political influence of the industry ahead of the elections.

Cryptos were sold off in a panic at the beginning of the month, briefly breaking through the $50,000 mark. However, they quickly rebounded and are currently fluctuating around $60,000, with related Concept stocks also showing a similar trend.

Following Biden's path.

On many issues, Kamala Harris has inherited Biden's positions. For example, in the energy sector, she encourages the development of clean energy and the electric vehicle industry, and she insists on international cooperation in foreign and trade policies, opposing isolationism. Additionally, the Democratic Party is positive about the legalization of marijuana, encouraging states to decide on the legality of marijuana themselves.

Compared to the "Trump trade," the characteristics of the "Harris trade" are not distinct. This is mainly because Harris herself has not directly participated in business activities, thus there are no stocks that are highly correlated with election outcomes. $Trump Media & Technology(DJT.US)$ As mentioned in our article on the "Trump trade," the industries benefiting from policies are varied, and the elasticity of stock prices concerning election outcomes is not obvious. It may be necessary to wait for policies to be implemented before observing their impact on the profitability of specific industries.

Responding to change with consistency.

From Trump's assassination attempt to Biden's withdrawal from the race, and recently Harris's campaign reversing its fortunes, we can see that changes in the political realm are no less significant than in the Capital Markets. Although Harris is temporarily in the lead, the race remains tight without an overwhelming advantage. In the face of ever-changing public opinion and environment, politicians often readjust their strategy, and current policy statements may not necessarily be implemented.

Historically, the impact of presidential elections on the Capital Markets has also been relatively limited. According to Schwab Statistics, since 1928, the S&P 500 Index has only experienced declines in four presidential election years, corresponding to the Great Depression, World War II, the burst of the Network Technology bubble, and the 2008 financial crisis.

The reasons for the decline are unrelated to the election year; broader geopolitical and economic factors are the primary drivers of stock market performance. This serves as an important reminder for investors that the market does not actually care about the elections themselves. Overall, more attention should be paid to macroeconomic factors and the performance of companies themselves, as these are more likely to be the dominant forces in the market.

Risk Disclosure: This content does not constitute a research report, is for reference only, and should not be used as the basis for any investment decision. The information contained herein is not a comprehensive description of the securities, markets, or developments mentioned. Although the sources of information are considered reliable, the accuracy or completeness of the above content is not guaranteed. Furthermore, there is no guarantee regarding the accuracy of any statements, viewpoints, or forecasts provided in this article.

Cryptocurrency-related assets exhibit higher volatility, and investing in assets related to Cryptos may carry greater investment risks.