Tech stocks are primed to surge another 15% as election results seem likely to ease regulation risk, Wedbush says

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  • Tech stocks are thriving on expectations for a divided government in 2021. Wedbush analyst Dan Ives thinks the sector can rally another 10% to 15% by 2021.
  • A Biden presidency and Republican-controlled Senate is the “Goldilocks election outcome” for tech names, Ives said.
  • A divided government would likely block Democrats’ efforts to more strictly regulate tech giants.
  • A Biden administration would take a softer tone to trade relations with China and ease pressures for tech stocks operating in both countries, Ives said.
  • Visit the Business Insider homepage for more stories.

Tech stocks are some of the biggest winners in the market’s post-election rally, and Wedbush analyst Dan Ives says the sector has much more room to run before the new year.

Wall Street is largely preparing for a divided government after forecasting a blue wave in recent months. The likely outcome, while impeding plans for near-term stimulus, erased Democrats’ chances to raise corporate taxes, strictly regulate industries, and reverse other Trump-administration policies.

A divided government is the “Goldilocks election outcome” for tech names, particularly the mega-caps that recently fueled indexes’ best days in months, Ives said in a Thursday note. The sector stands to rally another 10% to 15% before the year is out, he added.

“With a nirvana election scenario and fundamental drivers for tech names gaining momentum, we continue to be bullish on owning the secular growth stories for 2021,” Ives wrote.

Read more: From flipping burgers at McDonald’s to a self-made multimillionaire: How Willie Mandrell leveraged a simple real-estate investing strategy to acquire 40 units and achieve financial freedom

A Republican-held Senate tanks the chances of major legislative efforts to reform antitrust law. A blue wave could’ve led to increased scrutiny of major tech firms and their competition. A split Congress is positioned to ignore such concerns, which “posed the biggest risks to tech stalwarts with a ripple impact across the sector,” Ives said.

The Justice Department’s lawsuit against Google looms large, but is more a long-term threat than something that shapes today’s market landscape, he added.

Should former Vice President Joe Biden win the presidency, tech names can benefit further from an easing of US-China trade relations, according to Wedbush. The Trump administration’s aggressive trade policies and tariffs cut into some tech firms’ margins over the past two years. A Biden presidency would likely “take a softer tone” in decoupling supply chains between the two economic superpowers, Ives said.

“This would be a major bullish sign for the likes of Apple, Cisco, and semi names which are caught in the crossfire on this ongoing US/China battle with 5G front and center,” Ives said, adding some piracy and intellectual-property theft issues would linger.

Now read more markets coverage from Markets Insider and Business Insider:

The chief strategist at JPMorgan’s $2.3 trillion investing arm says the US elections could resolve a ‘polarized’ stock market amid sharp political divisions — and pinpoints 4 trades that are likely to benefit

3 veteran investors share where to invest now to build resilient, long-term portfolios that win even if the elections produce a gridlocked government

An advisor at the world’s largest wealth manager breaks down why a Biden win and a split congress is the best long-term outcome for markets — and says investors should look to these 4 sub-sectors for ongoing gains

https://markets.businessinsider.com/news/stocks/tech-stock-outlook-rally-divided-government-elections-faang-wedbush-analyst-2020-11-1029772088

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