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Stock Ideas Investors Daily Edge Winning And Losing Sectors After The Election
Stock Ideas Investors Daily Edge Winning And Losing Sectors After The Election 
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| Winning And Losing Sectors After The Election |
| Monday, 03 November 2008 | ||||||||
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It’s finally here. The long awaited and hard fought election will end tomorrow (at least I hope we don’t see a repeat of 2000 where we don’t know who won for weeks). Rather than make predictions about the election itself, I want to tell you how I think things will play out after the election. First, I think the overall market will rally after the election regardless of which candidate wins. There could be a knee-jerk reaction to the downside should Obama win, but this is part of the old belief that Democrats are bad for business and investing. History tells a different story than the actual belief though. The thing that will happen on Wednesday is that the uncertainty will be removed. The uncertainty of the election has been weighing on the market for the past few months. It’s been hard to tell, because of the credit crisis, but trust me the election has been weighing on the market as well. So overall we will likely see the market rally over the next couple of months. Historically the market rallies after elections, regardless of whether it is a Republican or Democrat that is elected. Secondly, as I have expressed in recent articles, the market is extremely oversold and the sentiment is extremely bearish. So even if this weren’t “the most important election of our life” we would likely see a year-end rally. As far as each candidate and the sectors they will impact the greatest, the scenarios are very different in some areas and very similar in others. Let’s look at the winning and losing sectors under both Obama and McCain. The big winners with an Obama victory will be Biotechnology and Alternative Energy. With Biotech, the fact that Senator Obama wants to give the healthcare system a complete overhaul will push for new technology that improves healthcare at a lower cost. Look for incentives to flow into this sector whether it is with tax credits or grants, there will be a push for new developments from the group. Senator Obama also supports stem-cell research and should he win, look for a boost to stocks in this arena.
Alternative Energy, particularly solar, will be a big beneficiary of an Obama administration. On the campaign trail he has said he wants to direct $150 billion towards alternative energy and lowering our dependence on foreign oil. As we all know, what is said on the campaign trail and what is done after the fact can be very different. While he might not able to direct the whole $150 billion toward the sector, you can bet there will be money pushed that way, how much money is available will be determined later. One sector that will certainly get hurt with an Obama administration is big-cap pharmaceuticals. The same desire to overhaul the healthcare system that I mentioned as a benefit to biotech will be a hindrance to pharmaceuticals. The reason for this is that he will likely push for lower drug prices at the consumer level. This will limit what the drug makers can charge and limiting their revenues. As for McCain, the obvious winners will be the Defense sector and oil and gas sectors. While Obama believes a timeline should be set for withdrawing from Iraq, McCain doesn’t believe such a mandate should be put forth and the U.S. will likely continue to spend heavily on Defense should McCain win. A McCain victory should also provide a boost to nuclear energy companies. He has made it clear on the campaign trail that he is in favor of finding alternative energy sources beyond oil, but where Obama prefers wind and solar energy, Senator McCain prefers nuclear energy. One area that will likely lose should McCain win is the infrastructure sector. Senator McCain wants to curb government spending, at least that is what he is saying on the campaign trail. Like I said about Mr. Obama wanting to spend $150 billion on alternative energy sources, what is said on the campaign trail and what actually happens after the election are two different things. Remember President Bush campaigned on less spending as well, but there haven’t been any cuts in spending over the last eight years. Regardless of which candidate wins, they will be inheriting one heck of a mess. The current economic environment is one of the worst I have seen in my lifetime, the deficit that we are facing is astronomical, and the job losses we have had over the last year have combined to make this a daunting task for the next administration. Consumer confidence is at an all time low recently. The best thing the new President could do for this country is lift the spirits of our citizens. Consumers are not likely to open up their wallets until they see hope that the economy is improving. Lifting the confidence level might get them to open their wallets a little. Regardless of who wins tomorrow, I wish them luck. They are going to need more after the election than they need it in the election. Good luck and good trading, Rick P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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