Talk of Presidential Race Showing Up on Earnings Calls

The 2024 election, which polls say is close between Vice President Kamala Harris, a Democrat, and former President Donald Trump, a Republican, certainly has the attention of corporate executives and investors.

The number of second quarter earnings calls that included the terms “election” or “elections” dwarfed the word’s mentions from the same period in 2020, the previous presidential year, according to a report by FactSet, the research firm.

Of the S&P 500 companies announcing quarterly earnings between June 15 and August 15 (the peak reporting period for the second quarter), 116 cited the term, up from 65 for the comparable 2020 timespan.

Among sectors, the highest number uttering the words election or elections in the calls were financials (22) and industrials (21), perhaps because of the perception that the winning party will have an effect on stocks prices, trade and foreign policy, which could influence their future revenue and earnings.

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The FactSet study covered only U.S.-traded companies, although it would not be surprising if election mentions have risen in earnings calls for foreign corporations. This is a busy year for elections, involving almost half the global population. Thus far, the Labour Party returned to power in the U.K, a leftist coalition made big advances in France’s parliamentary contests and Venezuela’s president, Nicolás Maduro, claimed victory in a still-disputed balloting.

It is common on earnings calls for company managers to “comment on domestic or international events that may have an impact on their business in future quarters,” wrote John Butters, FactSet’s senior earnings analyst, in the report. This year, Butters added, interest in the race is enhanced by the “uncertainty” of the contest.

In the FactSet report, government policies cited most often were energy and carbon emissions, which included renewables and electric vehicles, at 19 earnings-call meetings. Regulations were next at 15, followed by the Inflation Reduction Act (a mammoth 2022 measure aimed at aiding green energy production and lowering greenhouse gas emissions, among other things) at 10 and tariffs/trade, also at 10.

Still, what might account for the heightened election earnings-call interest in 2024? Possible factors:

The relative closeness of the race. In an amalgam of national polls, Harris leads Trump by 2.9 percentage points, a slight improvement for her from a month ago, when her lead was 0.8 point;
Heightened partisanship. Trump is a divisive figure, although both candidates have favorability ratings on the low end, with Harris slightly ahead of Trump: Per a Pew Research Center survey of U.S. adults, 44% have a positive view of Harris and 42% of Trump;
The circumstances surrounding Harris’ sudden elevation as her party’s nominee after President Joe Biden’s withdrawal. She was not on voters’ radar during the primaries (Biden was on the Democratic ballot), when people customarily get to know the candidates. As more voter and media scrutiny is trained on her, some wonder whether her advantage will remain.

To be sure, 2020 could be viewed as an anomalous year, as the pandemic was a higher profile event than the presidential contest. In its study, FactSet did not relate any 2016 data.

For what it’s worth, investors who participate in the latest PredictIt election contest (in which one bets on the most likely winner) reveal Harris ahead by 56% to 46%—a more comfortable margin for Harris, albeit not a statistically weighted finding, as opinion polls are.

To be sure, presidential polling is hardly an infallible predictive tool, but whatever the outcome, the presidential election seems likely to continue as a primary topic on everybody’s lips in the second half of the year.