- In our election playbook, we discuss some investments that could possibly receive an election boost.
- Some areas that may fare better under Clinton include: alternative energy, emerging markets, and healthcare services.
- Some areas that could potentially get a boost from a Trump presidency include: biotech/pharmaceuticals, energy, and financials.
- An increase in stock market volatility around the election is still possible, but we are encouraged by the market’s historical tendency for late election year rallies.
With the election fast approaching, we present our election playbook. With Election Day just 15 days away, and the three presidential debates behind us, investors want to know what the upcoming change in power in Washington might mean for their portfolios. Here we offer our election playbook, including some potential investments that could possibly receive an election boost.
This commentary is not intended to promote short-term trading. Election-related policy impacts are just one part of a sound investment decision.
We offer the following advice for stock market investors who may be either worried about the election or simply looking for opportunities to profit from it:
· Campaign rhetoric is mainly just that—rhetoric. Priorities for the candidates do not necessarily match the amount of time they spend discussing various issues on the campaign trail. For example, should Donald Trump win the election, we would not expect him to immediately slap big tariffs on imported goods and potentially start a trade war. Similarly, we would not expect Hillary Clinton to actually break up the big banks even if she could do so unilaterally
· Checks and balances. Many campaign promises will not get through Congress to be implemented even if they are a top priority for a newly elected president. For example, significant subsidies for college tuition that Hillary Clinton supports may sound great in theory but are unlikely to get through Congress (Republicans would likely filibuster this proposal if they did not have a majority in the House). Also keep in mind that newly elected presidents tend not to have as much political capital as they think they will; one of the reasons they are typically unable to get all of their top priorities accomplished.
· Corporate America is adaptable. Corporate America has operated under many different political regimes over time. Over the past 80 years, many disruptive policies have come and gone — as have recessions, periods of high inflation, interest rate spikes, Federal Reserve rate-hike cycles, wars, terrorist attacks, etc. Through it all, S&P 500 companies have grown profits by an average of 8 percent annually.