How to trade the US presidential election

Here are some sectors and stocks that could benefit depending on who wins the White House.

By Benzinga Nov 1, 2012 12:03PM

AmeriCulture copyright Russell Tate, iStock Vectors, Getty ImagesBy Sam Mattera, Benzinga Staff Writer


With less than a week to go until the U.S. presidential election, traders have only a handful of sessions left to align their portfolios.


A Barclays survey of investors indicated that the consensus view is for a Romney victory to be positive for stocks, while an Obama victory would support bonds. 


Traders may view a Romney presidency as catalyst for a more favorable environment for business, and therefore the equity market. On the other hand, an Obama re-election might mean a worse business environment, and thus funds would flow from equities into fixed-income.


Is this view realistic? Stocks under Obama have done remarkably well, with the S&P 500 more than doubling during Obama's first term. This remarkable performance has continued despite 2012's questionable business environment, confounding bearish investors who cite declining revenues and weak forecasts as fundamental reasons for why the market ought to be trading sharply lower.


It might not be the President who is affecting stocks, but rather the Chairman of the Federal Reserve, Ben Bernanke. As the Fed has followed an aggressive monetary policy through multiple rounds of quantitative easing, the stock market has gradually moved higher.


If Bernanke has been the one sending stocks higher, then keeping Obama in place would seem to be a better recipe for market success regardless of the underlying business factors. Although originally appointed by then President George W. Bush in 2006, Bernanke was re-appointed by Obama in 2010. With his term set to expire in 2014, whoever wins the presidential election next week will have the opportunity to nominate the next Federal Reserve Chairman.


According to reports published earlier this month, Bernanke -- even if nominated to continue his term -- will leave the Fed in 2014. Of course, Obama might be more likely to appoint a more dovish chairman as Bernanke's successor, one more concerned with the employment rate. On the other hand, Romney might appoint a more hawkish chairman concerned with keeping inflation at bay.


More interesting is the possibility that Romney may try to push Bernanke out the door prematurely, maybe even asking for his resignation. That seems unlikely, but could lead to turmoil in the markets.


Investors might look to specific sectors or companies for performance depending on the election outcome. With a Romney victory, stocks in the defense, energy and financial sectors might benefit. With an Obama win, traders might look to insurance, alternative energy and hospitals.

Should the country go over the "fiscal cliff," defense stocks might be battered on expectations of reduced military spending. Romney, if elected, would not be inaugurated until January 2013 -- after the fiscal cliff cut-off. The fiscal cliff carries a high degree of uncertainty, and it would be foolish to predict exactly how the issue will be resolved, if at all.


If recent actions are any indication of future performance, Congress will manage to find a way to extend the fiscal-cliff deadline just a bit longer. That would mean President Romney would be able to influence the outcome. In that case, Romney might be more likely to give priority to protecting the defense budget over Obama, thereby limiting the downside to defense names. Romney budgets, too, would likely include more spending on the military than Obama's, further boosting defense stocks like Lockheed Martin (LMT) or Raytheon (RTN).


As for financial stocks, the underlying companies could see better profits under Romney as president. Following the financial crisis, Obama signed the Dodd-Frank Act, establishing extensive new financial regulations. He also pushed for the Volcker Rule -- intended to stop the banks from proprietary trading.


Romney might not have any chance to abolish these rules, but if elected, his administration might hinder additional regulation -- a win for financials like JP Morgan (JPM) and Citigroup (C).


As for energy, President Obama has presided over a resurgence in American oil production. That said, Obama has blocked projects like TransCanada's (TRP) Keystone XL pipeline. Romney as president may be more favorable to projects like Keystone, and push for expanded use of the nation's natural gas, and perhaps increased exports of liquefied natural gas. Companies like Cheniere Energy (LNG) could benefit in that scenario.


And if President Obama is re-elected? S&P Capital IQ argued in September that the Obama administration has been supportive of telecommunications, and would continue to be so during his second term. Obama has encouraged broadband expansion and shifted wireless spectrum from television broadcasters to telecom providers. Verizon (VZ) and AT&T (T) are staple plays in this sector.


Alternative energy has been a favored industry for Obama's administration, and future Obama budgets could include more tax credits and subsidies for companies in the sector. Stocks like NextEra (NEE) and First Solar (FSLR) might see a notable boost during a possible second Obama term.


Finally, hospital stocks could rally if Obama wins next week.


After being confirmed as constitutionally permissible by the Supreme Court, the only possibility for Obamacare to be abolished would be under a Romney presidency. If Obama wins next week, Obamacare might be legal for the foreseeable future.


Under the provisions of Obamacare, more Americans are expected to be covered by private insurance. As it stands, hospital emergency rooms are legally required to treat people who do not have insurance -- weighing on their bottom line. With less of these emergency room free riders, hospitals might see their profitability increase in coming years. Stocks in this industry include Tenet Healthcare (THC) and HCA Holdings (HCA).


With only three full U.S. trading sessions left before polls open, traders should act quickly if they wish to rebalance their portfolios ahead of the election.


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17Comments
Nov 1, 2012 2:24PM
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The trades are simple....

Obama win, INVEST overseas, in Specie and Guns and Ammo.  Prepare for a debt induced depression.

Romney win, INVEST in America, buy  Stocks.   Prepare for a strong dollar and an end to the democrat war on the middle class.
Nov 1, 2012 1:58PM
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There is only one end of socialism, bankruptcy!!! If Obama is elected I'm going to sign up for every government program and help America go bankrupt. I have never taken a government program in my  life, however, if Obama is elected the only way Americans are going to learn the failure of socialism is to suffer the consequences.
Nov 1, 2012 3:34PM
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OHIO for Romney/Ryan !!!   Impeach Obama !!!    Democrats for Romney/Ryan !!!  Tired of all the BS from Obama / Biden / Axelrod / Clinton , etc.   Clintons, you both know that you want Obama to lose !!

Market will CRASH, if Obama is re-elected by all the IDIOTS we have walking the streets like the' Walking Dead ' !!     GO ROMNEY !!    GOD BE WITH US !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Nov 1, 2012 3:41PM
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By merging our labor pool with the rest of the world, we have also merged our standard of living with the rest of the world.

"globalization" and "the global economy", it is important to keep in mind that those are code words for the emerging one world economic system that is systematically wiping out the U.S. middle class.

A one world labor pool means that the standard of living for the U.S. middle class will continue falling toward the standard of living in the third world.

But whenever someone mentions how incredibly unfair and unbalanced our trade agreements with other nations are, they are immediately labeled as a "protectionist".

globalism is pushing the standard of living of the middle class down to third world levels....

It is time to stop listening to the politicians that are promoting "the global economy". They are lying to us.

If you want an America where there are less jobs, where more Americans are on food stamps and other anti-poverty programs and where our cities continue to be transformed into deindustrialized hellholes, then you should support the Obama Administration and emerging global economy.

But if you care about the standard of living of the U.S. middle class and you want for there to be some kind of viable economic future for your children and your grandchildren then you had better start caring about these issues and doing something about them.Please wake up America.

Obama and his socialist Global Czars must go.

.

Nov 1, 2012 5:21PM
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Has anyone heard so much as a peep out of Mitch McConnell? Or John Boehner? You remember them don't you? The two guys that vowed to make President Obama a one term president at all costs, including destroying the economy? The two guys whose obstructionist attitudes lead to a U.S. debt downgrade for the first time in history? But guess what?  Inspite of their totally unpatriotic and totally egotistical attitudes, Obama will be reelected easily. The stock market is up over 70% since Obama took office, the job picture is improving steadily, housing has begun to rebound. Imagine how good things would be if the party of "No" that filibustered in the Senate more than anytime in history had worked for the best interests of the American people. We haven't seen much out of Trump or Palin either. The Tea Party has also grown silent as of late. If Romney the chameleon were to win this election these people will be back like never before.  OBAMA/ BIDEN 2012 !!
Nov 2, 2012 8:33AM
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Only winners are the politicians, wall street, and the news channel.

 

They make money no mattter what happens.

Nov 1, 2012 2:19PM
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I think you need better writers, Microsoft. BENEFIT from these elections? No one wins when there is this much overwhelming corruption.

BTW... "voting day" may be next Tuesday, but neither candidate has addressed job recovery and the massive problem that is the WHOLE financial sector... banks, Wall Street, the Fed, cardboard cut out companies run by hired-in grubbers... all of it. The Electoral College may decide who is our new President BUT We the People STILL run this country and before being sworn-in, the elected gets to tell us the truth or gets the boot. Our society is based on Freedom, not New World Order.
Nov 1, 2012 3:54PM
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The trades are simple....

Are they? You have America investing overseas. Isn't that exactly how all of this happened? Your moronic posts always seem to forget that the Gramm Leach Bliley Act legalized financial sector collusion. The abettors went wild investing overseas while recommending job terminations here. George W. Bush redesigned the Dollar, built faster printing presses and raised the Debt Ceiling MORE TIMES than any other President in history. Your jackass thinking is what destroyed us. We have been primarily under-employed since the pieces of The Bush Terrorism Initiative were set in place and blockaded from our careers while GOP supporters have enjoyed literal run of the asylum since. When in HISTORY has a Party of NO been allowed to stop the nation from progress without seeing jail cells or guillotines? Invest in "specie"? Invest in feces, you'd be able to convert it to fertilizer eventually. Metals are worthless without industry. What? You expect us to turn over a nugget for some drop-shipped crap from China? Romney won't can't help us. He can only be the last push off that cliff we NEVER recover from. If his campaign were an IQ Test, he'd be struggling t o clear- IDIOT with those flip flopping positions. The guy is too old to **** so he wants the Presidency instead. Is that really who YOU want in the White House?

Go ahead and keep pumping your own thumb count up, if that's all you have to do today. I will keep running companies that help America. I will vote for Obama. YOU can relocate when he wins. Take your specie feces and your gun. See how well received you are. 
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