Whether you are a Democrat, Republican or Independent, the 2016 Presidential Election seems to be heading towards a Hillary Clinton victory. We do not know who will win but so far it appears that unless a major disaster befalls the Clinton campaign, Hillary Clinton will be our next president. With that stated, it is important to review what would probably occur should Clinton or Donald Trump win.
First, the equity markets react negatively to uncertainty and by that measure, the markets suspect they know what a Clinton presidency will mean to the economy while there is much more uncertainty under a Trump presidency. Due to that uncertainty, we would expect the equity markets to react less negatively under a Clinton presidency.
Second, with 40% of S&P 500 companies generating about 40% of their revenues from global trade, these companies will prosper better under a Clinton presidency than a Trump presidency where protectionist statements will rattle global trade and harm companies that depend upon it.
Third, military contractors should do well under either a Clinton presidency or Trump presidency. Clinton is more hawkish than Obama as is Trump.
Fourth, financial service companies will receive more restraints under Clinton administration as she desires to increase restrictions beyond those listed in Dodd-Frank and she is a big supporter of Consumer Financial Protection Bureau. These government restraints will increase costs and reduce future profits but amazingly, the industry is rising on a belief that the overall Clinton presidency will be better for the economy and growth in the economy will be better for the financial service industry. Trump plans to cut back on Dodd-Frank and Consumer Financial Protection Bureau which will be better for the industry’s profits but the overall effect on the economy by his economic plan is anticipated to be so bad for the economy that overall Wall Street considers Trump a net negative to a Clinton presidency.
Fifth, the Energy industry no matter who is president will suffer from oversupply of both petroleum and natural gas. Technology is such that the world can produce more oil daily than current demand. Those fundamental factors will not change no matter who is elected president in November. However, government policy under the two nominees is very different. Clinton will continue to assist the alternative energy industry while discouraging fossil fuels, in general, and coal in particular. Trump, however, will encourage more drilling and promote the XL Pipeline.
Sixth, the Health Care industry will face very different pressures and generosity from the two administrations. Clinton will continue to pressure the pharmaceutical industry to rein in costs which will harm biotechnology firms the most. Clinton is promoting managed care which will benefit hospital and managed care stocks. Trump’s presidency will assist the pharmaceutical industry by promising less regulation than a Clinton presidency and hospital stocks will be harmed by Trump’s call to repeal the Affordable Care Act, better known as Obamacare.
With all this information, the most important question is how will this help or hurt your portfolio and what should you do. Most of you have well balanced portfolios that will do well under a Clinton presidency and will weather a Trump presidency. We will continue to communicate what we believe is happening as we see changes in the future.