How to bet on "Harris Trade"

With Biden withdrawing from the presidential race, Vice President Kamala Harris has become the Democratic candidate. Despite joining midway, Harris's poll numbers have been climbing. As of September 2, the RCP poll shows Harris with a 48% chance of winning, slightly ahead of Trump's 46.8%.

In the upcoming months of September and October, the presidential candidates will participate in several debates to showcase their policy positions and debating skills. If Harris performs well in these debates, she may further strengthen her lead. This article will explore Harris's policy framework and potential investment opportunities.

Reducing living costs

At the rally on the 16th, Harris introduced a highly anticipated housing policy. She announced a subsidy of up to $25,000 for first-time homebuyers and committed to building 3 million new homes within her first term. Builders constructing these homes for first-time buyers would also receive tax incentives.

Additionally, she plans to legislate against malicious rent hikes. These policies are expected to help over 4 million first-time homebuyers in the next four years.

Amid high inflation and interest rates, the U.S. is grappling with a housing shortage, soaring home prices and rents, and persistently high mortgage rates.

According to Zillow, overall housing costs have increased by 110% in the past five years, rents have risen by 35%, and home prices have surged by nearly 50%.

Research from the Atlanta Federal Reserve also shows that housing affordability has deteriorated nationwide in the past two years.

If this policy is successfully implemented, housing developers are likely to benefit. The National Association of Home Builders welcomed Harris's policy announcement.

However, it is worth noting that these companies have already profited handsomely in the current high-price environment.

Industry leaders like $D.R. Horton (DHI.US)$and $Lennar Corp (LEN.US)$ have both seen their stock prices more than double in the past two years. 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 the non-partisan Committee for a Responsible Federal Budget, Harris's economic plan could increase the deficit by $1.7 trillion over ten years. If the housing policy becomes permanent, this figure could rise to $2 trillion.

Trump's economic advisors have also argued that providing home-buying subsidies will not alleviate high home prices and will further fuel inflation and harm the economy.

Regarding food and daily necessities, Harris aims to promote the first federal law in U.S. history to ban price gouging. This would authorize government agencies to investigate and penalize companies exploiting consumers unfairly.

Crypto-friendly stance

While Harris hasn't personally endorsed cryptocurrencies like Trump, the Democratic Party remains open to them.

In August, Senate Majority Leader Chuck Schumer expressed his belief in the future of cryptocurrencies at a virtual currency forum, noting that the Senate might pass favorable regulatory reforms within the year.

The market anticipates Harris will take a more moderate stance than Biden. Under Biden's leadership, the SEC initiated several cryptocurrency enforcement actions, asserting that crypto tokens and their operators must comply with securities laws.

According to the Financial Times, Harris's campaign advisors have already engaged with top cryptocurrency companies to "reset" the Democratic Party's relationship with the crypto industry.

$Coinbase (COIN.US)$ CEO Brian Armstrong believes crypto supporters are becoming an important voting bloc, catching the attention of both parties. This underscores the industry's growing political influence ahead of the election.

Cryptocurrencies were sold off amid the early August recession scare, briefly falling below the $50,000 mark.

However, they quickly rebounded and are now hovering around $60,000, with related stocks also experiencing similar trends.

Following Biden's path

In many areas, Harris continues to follow Biden's lead. For instance, she encourages the development of clean energy and the electric vehicle industry in the energy sector and insists on international cooperation over isolationism in foreign and trade policies.

Additionally, the Democratic Party remains positive about marijuana legalization, encouraging states to decide its legality independently.

Unlike the 'Trump Trade,' the 'Harris Trade' lacks distinct characteristics. This is mainly because Harris has not been involved in business activities, so there isn't a stock tied to her, as there is with the $Trump Media & Technology (DJT.US)$ .

As noted in our 'Trump Trade' article, industries that benefit from policies are diverse, and stock prices don't usually respond dramatically to elections. It might be more practical to watch how specific industry profits are affected once policies are implemented.

Adapting to change

From the assassination attempt on Trump to Biden's withdrawal and now Harris's lead, political changes are as volatile as the capital markets.

Although Harris is currently ahead, the race remains tight with no clear leader. Politicians often adjust their strategies based on changing public opinion and circumstances, so current policy statements may not be implemented as planned.

Historically, presidential elections have had a limited impact on the capital markets. According to Schwab, the S&P 500 index has only declined four times in election years since 1928, corresponding to the Great Depression, World War II, the dot-com bubble burst, and the 2008 financial crisis.

The reasons for these declines are unrelated to the election year; broader geopolitical and economic factors are the primary drivers of market performance. This is a crucial reminder for investors that the market does not care much about the election. That being said, attention might be better directed toward macroeconomic trends and corporate performance, as these are more likely to be the dominant forces in the market.

Additional Disclosures: This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Furthermore, there is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct.

Crypto-assets are highly volatile and investing in crypto-assets-linked stocks may involve significant capital risks.