President Obama has now officially been sworn in for his second term, the galas are over — and it’s time to get down to business.
What does a second Obama term mean for Wall Street? How are traders going to view his new agenda? Which stocks and sectors stand to benefit the most from the changes in his Cabinet?
Let’s take a look. We believe the following developments are going to have the biggest impact on the stock market.
Obamacare Will Stay Intact
It’s hard to believe, but we still haven’t seen all of the changes outlined in the Affordable Care Act take effect yet. Many provisions — such as implementing health-insurance exchanges and coverage for everyone, regardless of preexisting conditions or gender — won’t take effect until 2014.
However, even though we’re still waiting on these changes, Wall Street is going to continue to reward hospital operators and healthcare insurers such as:
- HCA Holdings (NYSE:HCA)
- LifePoint Hospitals (NASDAQ:LPNT)
- Health Management Associates (NYSE:HMA)
- Tenet Healthcare (NYSE:THC)
- Community Health Systems (NYSE:CYH)
- Vanguard Health Systems (NYSE:VHS)
- Humana (NYSE:HUM)
- Aetna (NYSE:AET)
- UnitedHealth (NYSE:UNH)
- WellPoint (NYSE:WLP)
- CIGNA Corporation (NYSE:CI)
- Coventry Health Care (NYSE:CVH)
Jack Lew Being Nominated for Treasury Secretary
One of the major criticisms of the Jack Lew nomination revolves around the fact that he has never had any domestic or international finance experience. Rather, he’s a budget guy who has spent his career trying to understand federal spending.
And that means large financial institutions should have a great run in the coming years.
If Lew truly is a budget guy, he isn’t going to be putting much pressure on Wall Street to reform its questionable business practices. Oversight will most likely remain lackluster, and profits are bound to rise. Plus, if Lew can work some magic and help move changes through Washington that would cut the deficit, the economy would start to pick up — and big banks would ride that rising tide higher.
In either case, we expect large financial institutions, such as these, to keep climbing:
- JPMorgan Chase (NYSE:JPM)
- Bank of America (NYSE:BAC)
- Goldman Sachs (NYSE:GS)
- Citigroup (NYSE:C)
- Wells Fargo (NYSE:WFC)
- AIG (NYSE:AIG)
Chuck Hagel Being Nominated for Defense Secretary
If the “military industrial complex” was nervous about the looming sequester (mandatory spending cuts) and the Obama administration’s increasing dependence and focus on drone strikes instead of larger military actions, the nomination of Chuck Hagel should have everyone shaking in their boots.
One way or another, it looks like defense spending is going to be cut during Obama’s second term. Whether you believe that’s a good or a bad idea, politically speaking, it will certainly have an impact on large defense contractors such as:
- Lockheed Martin (NYSE:LMT)
- Northrop Grumman (NYSE:NOC)
- General Dynamics (NYSE:GD)
- Raytheon (NYSE:RTN)
Vice President Biden’s Gun-Control Recommendations
Lastly, Vice President Joe Biden’s gun-control proposals and the pending fight we’re about to see in Congress are going to be a boon for gun stocks. If gun-ownership advocates continue to fear they may not be able to buy the weapons or ammunition they want in the future, they’re going to continue stockpiling those products, which should drive the following stocks higher:
- Smith & Wesson (NASDAQ:SWHC)
- Sturm Ruger (NYSE:RGR)
- Alliant Techsystems (NYSE:ATK)
- Cabelas (NYSE:CAB)
- Dick’s Sporting Goods (NYSE:DKS)
The trends we outlined above will take a while to play out fully. That means you could look to enter positions in these areas now, or you could wait until you see better entry opportunities. We’ll continue to keep an eye on these sectors and base our trade recommendations accordingly.
John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next trade and get 1 free month today by clicking here.