Wall Street Week Ahead: Big tech stocks may face post-election headwinds, no matter who wins

Some investors are betting the technology and communications stocks that drove a massive rebound in U.S. markets this year will face a tougher slog in coming months, no matter whether Republican President Donald Trump or Democratic challenger Joe Biden wins Tuesday's election.

"There will be a shift and it is starting, but it will take time," said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors, which cut its exposure to large-cap tech in September to neutral from overweight. Hedge fund manager David Einhorn of Greenlight Capital, a longtime tech bear, told clients in a letter this week that tech stocks were in the middle of an “enormous bubble” that popped when the S&P 500 hit its record high on Sept. 2, 2020.

The Justice Department’s lawsuit against Google in late October marked the first time the U.S. government has cracked down on a major tech company since it sued Microsoft Corp MSFT.O for anti-competitive practices in 1998.An expected US$2 trillion stimulus package by Biden, who leads Trump in national polls by 10 percentage points, could enhance the appeal of out-of-favor stocks like construction equipment and materials companies, investors said.

Potentially higher taxes under a Biden administration are another worry. Biden has proposed increasing the corporate tax rate to 28per cent from 21per cent, potentially weighing on companies' earnings.

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