Here's exactly how to prepare for a Trump or Harris presidency — and how to build a 5-part 'election-proof portfolio'

• Stocks often struggle in September and October, especially in election years.
• The S&P 500 has broken that trend by soaring to record highs.
• Technical strategist David Keller shared how investors should position their portfolios.

What should be the scariest time of year in markets is instead a full-blown celebration.

US stocks usually fall in autumn. September has historically been the worst month for equities , and the four since the pandemic have been volatile .

And while October is often better for stocks, that hasn't been the case in recent election cycles. In fact, the S&P 500 has only risen once in October ahead of the five presidential elections, technical strategist David Keller noted on a mid-October webinar about stocks and the election.

But the script has flipped so far this fall. Stocks seem to have missed the memo about those troubling seasonal tendencies and have made a precedent-defying run to new highs. The S&P 500 is in uncharted territory after steadily climbing by 8% since early September.

Although Keller has been blown away by the market's return in the last few weeks, he believes investors shouldn't get complacent before a potentially tectonic-shifting election.

"When we have an uptrend that lasts this long, when we have conditions that get this positive, maybe we start to think of contrarian signals that tell me maybe we're starting to rotate lower," Keller, the founder and top strategist at Sierra Alpha Research, said on the webinar.

The consensus view in markets is that there aren't any big red flags for stocks or the economy, though huge run-ups don't happen otherwise. As always, Keller said it's worth staying on guard.

"The amount of warning you often get between the peak happening and a pretty significant downturn is pretty limited, right? You don't have a lot of warning before that tends to happen," Keller said. "And so thinking of ways you can protect yourself on the way up — particularly when you get signs of exhaustion that we're already seeing in some ways — that's where I think it can behoove us as investors to try to get ahead of those aggressive pullbacks, if possible."

However, Keller has a hunch — based on various technical indicators that he follows — that this record rally still has more steam.

"The volume conditions, the breadth conditions, the sentiment conditions — all of which are getting sort of near that overheated, exhausted level, but not quite signaling a peak just yet," Keller said.

How to invest for a Trump or Harris victory

Though past performance can't predict the future, as the gains in the last six weeks prove, Keller still thinks there's value in knowing how US stocks usually fare following elections.

"What usually happens in an election year is, November and December are pretty bullish for stocks," Keller said. "Whoever's elected, there's a lot of optimism about what they're going to do, there's a lot of talk about change and improvement, and that optimism is usually reflected in the market."

A substantial pullback is inevitable, in Keller's view, though he's not sure whether it will happen in the back half of October or in January, once the shine from the incoming president wears off.

"The beginning of the next year is where it's sort of like the reality, the newly elected president, whoever it is, is now in office, now it's up to them to actually implement some of these things."

Speaking of implementation, Keller shared a detailed outline on his webinar of how certain parts of the market should perform under Donald Trump or Kamala Harris. The veteran strategist also talked about what he's half-jokingly calling "Dave's election-proof portfolio" of investments.

"I don't know if I want to guarantee that it's 'election-proof,' but I like to focus on which types of companies, which areas of the market stand to do well, most likely — regardless of who wins," Keller said.

Below are Keller's best ideas for either a Trump or Harris win, plus five investments that should be fine either way . Note that Keller isn't a financial advisor, so these calls shouldn't be treated as official advice.

How to invest if Donald Trump wins

A Republican presidency could result in higher spending on national defense, which would be a boon for defense contractors like Raytheon ( RTX ) or General Dynamics ( GD ), Keller said. The former is on a tear lately after rising 26% from its summer lows, and the latter posted a solid run of 7% but has been stuck in limbo for the last month.

Industrials broadly may also benefit after being one of the market's top sectors in the last few months. Keller said some of this strength may be priced in already, though he sees the group succeeding under Trump.

Traditional energy companies would almost certainly benefit from Trump's policies than those of Harris, Keller said, though oil prices and the trajectory of economic growth would likely be even bigger drivers. This sector has been the worst performer in the S&P 500 so far this year, though the technical strategist said its relative strength may improve under a different president.

Pharmaceutical stocks might also find Trump more sympathetic to their cause than Harris, as the regulatory backdrop for them would likely be much more lenient, Keller said. He'd play the trend through a fund like the SPDR S&P Pharmaceuticals ETF ( XPH ), especially since the once-ignored healthcare sector's technical trend has improved significantly since early July.

How to invest if Kamala Harris wins

Renewable energy and solar stocks seem like logical investments if Harris gets a promotion from vice president, Keller said. These companies have been shockingly weak under President Joe Biden, as the Invesco Solar ETF ( TAN ) has shed nearly 70% of its value from its peak.

Though far from a cure-all, a Harris win could give a boost to this beleaguered industry, Keller said. The group's technicals would have to improve substantially, which is why the strategist is watching to see if solar ETFs can reclaim their 200-day moving averages.

"While these companies should do better under that administration, I'm a little bit skeptical, just given the fact that they haven't done as well up until now," Keller said. "From a technical perspective, I still think they have quite a bit to prove before I think they're a decent bet."

Electric vehicles are another industry that should be pulling for Harris, Keller said. Ironically, he cited Tesla ( TSLA ) as a prime example of a big winner under this scenario — even though CEO Elon Musk is all aboard the Trump train .

A 5-part 'election-proof' portfolio

Investors who are tuned out of politics or don't want to speculate on this November's winner can instead put their money in parts of the market that should be fine either way , in Keller's view.

Homebuilders are the first such area, as the group should benefit from lower interest rates that cause demand for new houses to rise. Keller cited the SPDR S&P Homebuilders ETF ( XHB ) and the iShares US Home Construction ETF ( ITB ) as viable ways to play this red-hot trend.

Technology stocks are also worth sticking with, Keller said, even though they've had a massive run in the last few years. Semiconductor companies and technology giants like Alphabet ( GOOGL ), Meta ( META ), and Microsoft ( MSFT ) are among his favorite ideas here, even though they're dealing with regulatory scrutiny that may not be going away.

"This is more of a broader play, particularly a play on AI," Keller said. "Semiconductors are probably the best way to think of it, because you're getting exposure to those major players. Any sort of improvement in AI is going to be driven by semiconductors."

Another less-heralded way to play the AI boom are the utility companies that provide their power. Utilities happen to be by far the best-performing sector in the last three months , and Keller noted that the defensive group tends to be less volatile with high dividend income.

"If you're concerned about the instability of an election, new administration coming in, potential disruption because of whatever, and all the other things going on in the world right now — utilities are a pretty good place to play that," Keller said.

Speaking of, low-volatility stocks — including companies in the consumer staples sector like Procter & Gamble ( PG ), Coca-Cola ( KO ), and AT&T ( T ) — are also on Keller's mind. Their technicals look strong, and their resistance to selloffs is appealing heading into a new regime.

Lastly, Keller said infrastructure firms should also succeed under Trump or Harris. This industry is one of a few that Republicans and Democrats agree needs support. The strategist said that top ways to play it are Caterpillar ( CAT ), the iShares U.S. Infrastructure ETF ( IFRA ), or the Global X US Infrastructure Development ETF ( PAVE ).

"Regardless of who's elected, the infrastructure isn't getting any younger," Keller said.

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