What Election 2012 Means For Your Portfolio
So what will be affected by today’s elections?
Given the macro environment at the moment, I think that comes down to where the two men, President Obama and Candidate Romney, are most divided: energy, defense and healthcare.
An Obama win suggests the “greenies” will have a field day with continued emphasis on solar, wind and electric alternatives. Given the administration’s widely publicized screw-ups in this area, use caution though and do not confuse subsidies with profit potential. It’s still hard to find solid small-cap tech companies in a defensively oriented big cap market. Unless you’ve got a strong stomach for volatility or an extraordinarily compelling reason for investing under the circumstances, I’d stay away.
A Romney win will likely translate into further opportunities in “big” energy. I hate that term but I use it because everybody gets what it is…the lifeblood of our country. Expect coal, oil, drilling and pipeline companies to jump. Generally speaking, master limited pipeline partnerships or MLPs for short, are my favorites here. They tend to pay solid dividends and can be largely immune to swings in the underlying commodities.
Defense is pretty much a no-brainer. Candidate Romney has made it clear that he favors a strong military and that suggests, by implication, a strong defense industry. This speaks to investments in weapons manufacturers and high-tech companies making weapons systems infrastructure.
On the other hand, President Obama’s continued leadership will likely result in stark cuts. I’m not so sure the world’s environment will favor that at the moment, but it’s worth a cautionary note.
I don’t see a big difference one way or the other with regard to healthcare. The insurance companies are likely to make out like bandits in the years ahead, if for no other reason that neither President Obama nor Candidate Romney can change course quickly or effectively from where we are now.
Our healthcare system is a train wreck, and an expensive one at that. Neither candidate has the political willpower to take on serious Medicare/Medicaid reform despite the fact that everybody knows it’s the 800-pound gorilla in the room.
In closing, I’ll leave you with one final thought.
Wrapped up in the moment, we love to believe in our leaders. Rightly or wrongly, we’re wired that way.
The problem is that in our rush to judge the “other side” as part of the political process, we forget that any economic policy, any fiscal response to trouble, any change in taxes ultimately depends on Congress.
Wall Street knows this.
That’s why over the past 47 years, according to author Eric Singer who penned The Congressional Effect, the markets have risen less than 1% a year when Congress is actually in session but 16% a year annualized when it’s in recess.
Unfortunately, sending all 535 members home for good isn’t on the ballot.