With the votes in from the Super Tuesday primaries, it’s pretty obvious who the political winners were.
On the Republican side, Donald Trump took every state but Texas, Oklahoma and Minnesota, and most he carried by a wide margin. Bernie Sanders managed to take a few small states, but Hillary Clinton pretty well ran away with it in terms of delegate count.
There are still plenty of large states up for grabs, most notably California, New York and Florida. But at this stage, it’s looking to be a Trump vs. Clinton contest in November. Barring a late entry by an independent candidate, one of these two candidates will be the next president of the United States.
As to which one is more likely to win, that’s a toss-up. Recent polls have Trump edging out Clinton in the critical swing states of Florida, Ohio and Pennsylvania, but it is far too close and too early to call.
In any presidential election, there are perceived winners and losers in the stock market. In a “normal” election, you might think a Republican win would be a boon to banking, defense, oil and gas and “vice” stocks (booze, tobacco, etc.) and that a Democrat win would be bullish for alternative energy and healthcare.
But this is far from a normal year. The Democrats are a little more radicalized that usual, and Donald Trump is a complete wildcard. We still have very little information about what Trump’s policy initiatives will be.
Still, let’s try our luck and handicap the potential winners and losers here.
Technology
I’ll start with Apple Inc. (AAPL). Apple has found itself being used as a punching bag by the Republican candidates due to its standoff with the FBI over the bureau’s insistence that Apple help them hack the iPhone of the San Bernardino terrorists.
Now, I don’t expect that this story will still be news come November, let alone come January when the new president will take office. But I’m betting that Apple would prefer Hillary Clinton at this stage of the game.
Ironically, Trump might actually be better for Apple and for other cash-rich technology companies. Though this is pure speculation at this point, I would see Trump as being the candidate most likely to go along with a tax amnesty for offshore cash holdings. Apple, Microsoft Corporation (MSFT) and many other large tech names hold massive sums of cash offshore that they cannot repatriate without paying punitive tax rates. So it just sits there … idle.
Trump claims to want to bring investment and jobs back to America. So incentivizing American multinationals to repatriate offshore funds would actually make a lot of sense.
We’ll see.
Healthcare
The Affordable Care Act (aka Obamacare) is having some major growing pains. While popular with voters who previously had a hard time getting coverage, it’s wildly unpopular with those that have seen their premiums soar and their options limited.
Clinton claims to believe in Obamacare and blames rising premiums on price gouging by pharmaceutical companies. Now it remains to be seen whether this is true policy or simply campaign mantra, but you’d have to assume that Big Pharma companies like Merck & Co., Inc. (MRK), Novartis AG (ADR) (NVS) and Pfizer Inc. (PFE) would prefer that they not have to find out.
Trump wants to scrap Obamacare, and while his alternative isn’t comprehensive, it’s actually pretty sensible, even if we keep Obamacare. He wants to make health insurance a national market rather than a state market. This would introduce more competition and would create a larger pool of premium payers, which, all else equal, should reduce risk for the insurance companies and lower premiums for the policy holders.
But Trump has also had some pretty choice words for the health insurance industry. I can’t imagine that Humana Inc (HUM), Cigna Corporation (CI) and Aetna Inc (AET) want to find out what Trump’s reforms would mean for them.
And what about other industries like defense and energy?
It’s too early to say at this point. Clinton tends to toe the party line on climate change and alternative energy. All else equal, that should be favorable for First Solar, Inc. (FSLR) and other alternative energy providers. Trump seems to be far less committal on climate change and alternative energy, though he does seem to be more supportive of domestic oil infrastructure. That should broadly favor pipeline companies like Kinder Morgan Inc (KMI) or Enterprise Products Partners L.P. (EPD).
And defense? That’s really a toss-up. Despite being seen as the more aggressive candidate, Trump was a critic of the Iraq War and has at times seemed to advocate an isolationist foreign policy. So we probably wouldn’t get the “typical” surge of military spending we might normally get from a Republican president.
One thing is certain: The next nine months will be anything if not interesting. This will be an election for the history books that will keep investors guessing.
Charles Sizemore is the principal of Sizemore Capital, a wealth management firm in Dallas, Texas. As of this writing, he was long AAPL, EPD and KMI.
