Several stocks could rise if market volatility scales back after Tuesday’s U.S. presidential election, according to a Bank of America analysis. Stock market volatility climbed ahead of the election, with the the Cboe Volatility Index — known as Wall Street’s “fear gauge” — crossing 23 on Thursday. But with the winner of the election decided, the VIX has eased to around 16 on Wednesday. It’s expected volatility could continue to come out of the market and lead to further drops. In fact, Bank of America said in a recent note that the 3-month VIX vs. the VIX is below 1.0 and oversold as it was before the 2020 and 2016 presidential elections, indicating fear heading into this year’s election as well. “This suggests taking a contrarian bullish view on the U.S. equity market and favors a rally into year end,” the Monday note said. To react to this scenario, Bank of America screened for several lower-quality stocks inversely correlated to the VIX that could see a pop in their share prices. The stocks it found are all either buy- or neutral-rated by the firm. At the sector level, the firm said there is the potential for higher inflation under a sweep outcomem which suggests being overweight on energy, materials and financial names — many of which are included in this screener. Take a look at some of the stocks below: NXP Semiconductors made the list with a negative correlation relative performance to the VIX of 13%. The Netherlands-based semiconductor company lost 5.2% on Tuesday after posting disappointing fourth- quarter guidance due to macro weakness in Europe and the Americas and in the industrial and internet of things markets. NXP’s earnings exceeded estimates by 2 cents per share, however, its revenue was in line with estimates. Its shares are down 2.2% this year This weakness could continue. Morgan Stanley revised its 2024-2025 revenue estimates on NXP lower, expecting a period of stagnation in the automotive semiconductor market. The firm forecasted flat year-over-year growth in 2025 and expects semi suppliers to scale back their recovery expectations for the next year. Equipment suppliers Builders FirstSource and United Rentals also made the cut, with -17% and -23% correlation of negative relative performance to the VIX, respectively. Builders FirstSource shares rose nearly 5% on Tuesday, climbing back from its quarterly decline, after posting better-than-expected earnings for the third quarter. The company’s revenue fell short of analyst estimates from FactSet, hurt by commodity deflation and a decline in core organic sales as the multifamily housing market continues to slow. The stock’s rated neutral by Bank of America. Other stocks that could pop on a VIX decline include software maker Autodesk and financials Citigroup and Blackstone . Citigroup and Blackstone shares have gained roughly 23.8% and 29.6%, respectively, this year — slightly outperforming the S & P 500. “We view Citigroup risk/reward as attractive, with negative narrative overshadowing underlying progress,” Bank of America analyst Brandon Berman wrote in an Oct. 27 note, saying bank stocks more broadly will need more than an improving macroeconomic backdrop to outperform the broader market from here.
