Investing.com -- As the U.S. presidential race intensifies, Deutsche Bank analysts have examined the potential market implications of a Kamala Harris victory.
With Harris officially assuming the Democratic nomination, Deutsche Bank has focused on how her policies may affect various industries, particularly the multi-industry and electrical equipment (MI/EE) sectors.
In the scenario of a Harris victory, one of the most immediate opportunities lies in the housing sector. Harris has made housing a centerpiece of her campaign, pledging to build 3 million new homes over the next four years.
Backed by $40 billion in tax incentives for homebuilders and additional support for first-time homebuyers through a $25,000 down payment assistance program, this housing push is set to stimulate demand in residential construction.
As Deutsche Bank points out, companies with exposure to residential markets—such as Lennox International (NYSE:LII), Stanley Black & Decker (NYSE:SWK), Carrier Global (NYSE:CARR), Trane Technologies (NYSE:TT), and Pentair (NYSE:PNR)—could see growth.
These firms, which derive more than 20% of their revenues from housing-related activities, are well-positioned to capitalize on this surge in residential construction projects.
Harris’s focus on tackling climate change offers opportunities for companies in clean energy and electrification. As a key player behind the Inflation Reduction Act (IRA), Harris has backed policies that direct $365 billion toward energy security and climate-related investments.
If she wins, the IRA is expected to stay in place, which would benefit industries connected to renewable energy, electric vehicles (EVs), and energy-efficient infrastructure.
This could boost growth for companies like Eaton (NYSE:ETN), Hubbell (NYSE:HUBB), and Vertiv (NYSE:VRT), which specialize in electrical systems and grid upgrades.
Additionally, government incentives for EVs and battery plant construction could further help companies like Rockwell Automation Inc (NYSE:ROK), which is heavily involved in factory automation for EV manufacturing.
In addition, the HVAC (heating, ventilation, and air conditioning) sector stands to gain from Harris’s climate policies.
Her support for electrification and energy efficiency, bolstered by subsidies for electric heat pumps and other renewable energy initiatives under the IRA, could drive growth for HVAC manufacturers like Carrier, Lennox, and Trane Technologies.
Harris’s broader focus on reducing carbon emissions and promoting clean energy investments creates a favorable environment for companies involved in energy-efficient products and grid modernization.
Another key aspect of a potential Harris administration is her approach to trade. In contrast to the current administration’s protectionist stance, Harris is expected to pursue a more cooperative global trade policy, which would ease concerns over tariffs and trade barriers.
Companies like Stanley Black & Decker and Zurn Water Solutions (NYSE:ZWS), which rely on importing products from China, would benefit from reduced trade friction, alleviating one of the major risks they face under a more protectionist regime.
Harris’s environmental stance also extends to regulatory power, particularly in monitoring and remediating hazardous chemicals. The Environmental Protection Agency (EPA) is likely to retain stronger regulatory authority under a Harris administration, particularly in areas like PFAS (per- and polyfluoroalkyl substances) monitoring.
Xylem (NYSE:XYL), which has a small but growing presence in PFAS-related water treatment, stands to benefit from tighter environmental regulations and increased government attention to water contamination issues.
This would enhance the company's growth prospects in what is currently a niche but expanding market.
Despite these opportunities, Deutsche Bank analysts also flag several risks that could emerge under a Harris presidency, particularly related to tax policy.
One of the most notable concerns is the potential expiration of corporate tax cuts enacted during Trump’s administration, which lowered the U.S. corporate tax rate from 35% to 21%.
Harris has not explicitly outlined her tax policy, but if the Trump tax cuts expire, the corporate tax rate could revert to 35%, presenting an earnings headwind for companies with substantial U.S. exposure.
Companies like Emerson (NYSE:EMR) and Hubbell, which generate a major portion of their revenue domestically, could face a high-single-digit to low-teens negative impact on their earnings per share (EPS) as a result of higher taxes.
In addition to rising corporate taxes, Harris’s proposed increase in the excise tax on stock buybacks—rising from 1% to 4%—could also shift corporate capital allocation strategies.
Companies that have relied heavily on buybacks to return capital to shareholders, such as Honeywell (NASDAQ:HON), Illinois Tool Works (NYSE:ITW), Johnson Controls (NYSE:JCI), and Trane Technologies, may need to reconsider their priorities.
This tax change could prompt a greater focus on mergers and acquisitions or dividends, rather than share repurchases.
Another area of concern lies in Harris’s energy policies. While she has denied opposition to fracking, her administration is expected to place a stronger emphasis on renewable energy sources at the expense of traditional fossil fuels.
This shift could adversely affect companies with significant exposure to the oil and gas sector, such as Emerson, Honeywell, and Rockwell Automation, all of which derive a substantial portion of their revenues from oil and gas-related activities.
A move away from fossil fuels could weaken demand for their products and services, particularly in energy-intensive industries.