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2015 SOTU: 3 Stock Market Takeaways

President Obama gave the 2015 State of the Union last night, addressing for the first time a Congress fully controlled by the Republican party.

investors hard on ObamaThe president, who at first spoke glowingly about the progress America has made since he first took office in 2009, then moved on to broadly outline his remaining agendas in his final two years in office.

His primary focus was on “middle-class economics” — the concept that everyone should have a fair shot at success. He elaborated, saying:

“That means helping folks afford childcare, college, health care, a home, retirement —  and my budget will address each of these issues…”

But how will these initiatives be funded, and what does that mean for investors? According to the WSJ,

“His plans include some $235 billion in new spending, which he proposes raising through an increase in top capital-gains tax rates and new taxes on many inheritances, among other measures.”

Of course, for wealthy stock market investors, an increase in capital-gains taxes might be the single-most important byproduct of last night’s State of the Union initiatives. But with the details yet to be worked out and a Republican Congress to hurdle, these tax hikes are far from imminent.

So aside from the capital-gains tax increase, here are three initiatives Obama mentioned that could have profound effects on pockets of the stock market:

2015 SOTU Stock Market-Moving Initiative #1: Free Community College

What Was Said:

“…I am sending this Congress a bold new plan to lower the cost of community college  —  to zero.”

What It Could Affect:

This one is yet another threat to the for-profit education industry, which has already been on the skids in recent years as high student loan default rates in the industry led to federal inquiries. A congressional committee’s investigation into for-profit colleges in 2010 was followed up by an $11 billion federal lawsuit against Education Management Corp (OTCMKTS:EDMC), which had garnered the ire of the Department of Education.

EDMC stock is now headed to $0, and Corinthian Colleges Inc (NASDAQ:COCO) is nearly there as well.

If Obama’s proposal for free two-year community college tuition is adopted, for-profit colleges will likely face an exodus of students eager to go to school for free. That’s bad news for ITT Educational Services, Inc. (NYSE:ESI), Apollo Education Group Inc (NASDAQ:APOL), American Public Education, Inc. (NASDAQ:APEI), Strayer Education Inc (NASDAQ:STRA) and others.

2015 SOTU Stock Market-Moving Initiative #2: Lift the Cuba Embargo

What Was Said:

“In Cuba, we are ending a policy that was long past its expiration date.”

“…This year, Congress should begin the work of ending the embargo.”

What it Could Affect:

The closed-end Herzfeld Caribbean Basin Fund, Inc (NASDAQ:CUBA) soared when Obama first proposed the shift in Cuba policy, rocketing 29% higher. The fund invests in stocks that either have 50% of their assets in a Caribbean Basin country or derive at least half their revenue from the Caribbean Basin. CUBA stock popped an additional 2% today in the wake of the State of the Union.

While lifting the Cuba embargo would obviously flood the market with its most stereotypical export — cigars — publicly traded cruise lines offer investors the most direct way to benefit from the change.

Look for Carnival Corporation (NYSE:CCL), Royal Caribbean Cruises Ltd (NYSE:RCL), and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) to jump on the opportunity as soon as it’s legal.

2015 SOTU Stock Market-Moving Initiative #3: Keystone XL Veto (Probably)

What Was Said:

“…Let’s set our sights higher than a single oil pipeline.”

What it Could Affect:

Reading between the lines, Obama appears prepared to veto anything Keystone-related … unless that bill comes across his desk with plans to invest in America’s infrastructure.

If Congress is unwilling to attach infrastructure spending to a Keystone bill, this will be bad news for a number of energy stocks. TransCanada Corporation (USA) (NYSE:TRP), the company that has invested billions of dollars into the development of the Keystone XL, is the obvious loser here, but there are several others as well. Last year, InvestorPlace contributor Aaron Levitt pointed to TransCanada and three other stocks — Suncor Energy Inc. (USA) (NYSE:SU), Exxon Mobil Corporation (NYSE:XOM), and Valero Energy Corporation (NYSE:VLO) — as the primary beneficiaries of the project.

Citing Suncor Energy as the company with the most to gain, Aaron writes

“The Keystone XL will eliminate many logistics issues, and producers in the oil sands should immediately see a bump in price for their production when it starts flowing.”

Conversely, SU stock faces a big opportunity cost if Congress can’t throw together a veto-proof Keystone bill.

Regardless of one’s political leanings, investors should always stay attuned to how public policy changes can impact their stock market portfolios, and last night’s State of the Union gave investors plenty to consider.

As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.

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