These sectors that will 'endure' the 2024 election: Expert

Several catalysts for the 2024 presidential election are approaching: Trump's hush money trial sentencing and Trump's running mate selection will both occur in the next two weeks. TD Cowen deputy head of research Lisa Thomas joins Catalysts to offer insight into how investors should prepare their portfolios as Election Day nears.

Thomas suggests that investors focus on themes that will endure the presidential election and provide long-term gains: "We're putting tremendous focus on AI infrastructure. What are all of those architectural enhancements and improvements that are needed to really fuel the AI use cases that everyone is looking to? So for example, we upgraded Credo Technology (CRDO), which is a mid-cap name in the space that is working on enhancing speed in the data center. They had previously had a lot of customer concentration between Microsoft (MSFT) and Amazon (AMZN), but that's broadened out a lot. And we think that investors are increasingly starting to embrace those kinds of infrastructural names," Thomas says.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Nicholas Jacobino

Video transcript

2024 election could be a key risk for markets in the second half of this year.

Just this summer, we got a packed schedule, Trump sentencing in his New York hush money trial on July 11th, the Republican vice presidential selection coming up on July 15th and we've got the second presidential debate set for September 10th.

So how should investors be preparing for all of these key events?

Joining us to discuss?

We got TD Cowens, Deputy head of research, Lisa, thanks so much for being here.

I know in your list of s mid cap ideas here.

You have uh sections in on Washington policy for 2024.

I'm curious from the perspective of you and your colleagues, which candidate could potentially fuel more gains in the SMD cap space given the potential policies that they could be putting in following November 5th.

That's a great question.

But you know what I will say, Madison is what we have been really focusing on are the names and on the themes that are really going to endure uh regardless of which party and which candidate takes the White House and, and takes Congress.

Uh because as you point to um there are a lot of catalysts between now and the election, there's going to be a tremendous amount of noise in the cycle.

Uh I get to use my favorite expression, which is this one goes to 11 on a scale of 1 to 10.

So I would say, in fact, we're really, really focused on investments and on themes that are going to have that long cycle ability to withstand.

Um you know, the whipsaw regardless of who is in place.

Because on those themes, we think in fact, there is a tremendous amount of bipartisan agreement if you're talking about things like us, China decoupling, if you're looking at us protectionism and industrial policy and by the way, deficit spending, because despite the rhetoric that you went here on both sides, what we think is that you are very unlikely to see lightning on defense fund at a time when we are seeing such geopolitical risk on so many fronts.

So rather than really focusing on which party is going to, you know, be um I think the the best driver for Mim cap stocks, we would argue there are a lot of great sm CAPP opportunities regardless of who's in the White House.

So what is the thinking that investors should try to adopt, heading into this busy cycle in order to not get spooked by the noise as you call it?

Yes, look again, I think it's really focusing on those long run themes.

So if you're looking at industrial policy, certainly A I is, you know, on everyone's mind and on everyone's lips and we're looking more and more at those 2nd and 3rd derivatives of A I use cases.

But in the meantime, we're putting tremendous focus on A I infrastructure.

What are all of those, you know, architectural enhancements and improvements that are needed to really fuel the A I use cases that everyone's looking to.

So for example, we upgraded Credo technology, which is a SM cap name in the space that is working on um enhancing speed in the data center.

Um They had previously had a lot of customer concentration between Microsoft and Amazon, but that's broadened out a lot.

And we think that investors are increasingly starting to embrace the kinds of infrastructural names.

Digital Bridge is another name that supports uh hyper scale or data center operators with a portfolio of companies in that digital infrastructure space.

We think increasingly by looking at names that are really tied to those long run themes, then you get to steer clear of the noise, you get to see what happens just as we all are.

Um because certainly, you know, particularly coming out of last week's debate, the endless headlines, the endless noise.

We don't think that you're going to win in investing by getting caught up there.

Focus on what's going to matter regardless of who's in the White House, regardless of who's in Congress and what's going to matter with some real durability over the next several years.