The Iowa Caucus has left uncertainty about what two candidates will be running in the general election. This uncertainty is disruptive to markets, as investors will not commit new money until they feel comfortable in the future direction of price. Market participants are forced to pay attention to the primaries because of the effect a winner might have on equities, bonds, commodities and currencies.
The remaining five candidates all seem to have equal chances to get to the presidential election, bringing their policies and ideals with them. Each candidate has different policies and goals that will affect market prices, not just domestically, but globally.
A speculator can profit it they make the right bets, so let’s go over some of the stocks that will benefit, or not, from each potential candidate.
Bernie Sanders Wins
Bernie Sanders shocked a lot of people on Monday by placing a virtual tie with Clinton. Bernie’s call for a living wage, free college, and higher taxes on the rich is appealing to young people and that showed in the election. If he wins, this would be a shock to the market and instill short term-fears in how his policies would affect the economy.
Bernie hopes to take down the big banks, by aiming to bring about massive regulation that would take the banks apart. This would ultimately be bad for the entire financial sector as well as the market overall. A Bernie election will undoubtedly harm stocks like JPMorgan (JPM), Citigroup (C), Goldman Sachs (GS), and Bank of America (BAC). All of which are Zacks Rank #4 (Sell).
However, small regional banks will actually benefit as they become more competitive to larger banks under attack. While they might lose they’re takeover luster, their ability to become the top dog in their region will be enhanced.
PrivateBancrop (PVTB) is a Midwest regional bank out of Chicago and a Zacks Rank #1 (Strong Buy). The company has a $3 Billion market cap and a Forward PE of 15.
The stock is down over 10% this year, a move that has been shared among most banks, big and small. However, the move seems unjustified, as estimates over the last 30 days are rising 2% for the current quarter and 1.5% for next year.
The company has a great track record of upside EPS surprises, beating in every quarter since 2011, except one.
Hillary Clinton Wins
If Clinton wins, the markets will likely take it as business as usual and a continuation of the Obama presidency. Banks might struggle under Clinton as well as she has promised to take on Wall Street. The sectors that stand to benefit based on her platform are healthcare, infrastructure, and Alternative Energy.
Solar energy would be a direct beneficiary of a Clinton presidency, with her having set a national goal to have half a billion solar panels installed across the country by 2020. She also hopes to generate enough renewable energy to power every home in America within ten years.
First Solar (FSLR), a Zacks Rank #2 (Buy), would benefit from Clinton’s climate change policy to utilize solar. The Arizona based company develops, engineers, constructs and operates some of the world’s largest grid-connected PV (photovoltaic) plants in the world. The company manufactures solar modules, with an advanced thin film semiconductor process, that lowers solar electricity costs.
Estimate revisions for the company have risen 3.9% higher over the last 90 days, going from $4.08 to $4.24. The company stands to benefit from continued incentives and subsidies, coming from a Clinton presidency.
Donald Trump Wins
The day after The Donald gets elected you go out and buy casinos right? Wrong. If you do that you have a blind risk coming from China. Most of the high profile casinos have exposure to China and Trump, which will be horrible for China and Chinese stocks. Trump intends to start a currency and trade war with China and promises to bring back manufacturing to America. For this reason, I want to look at construction and manufacturing stocks.
Flour (FLR) is a Zacks Rank #2 (Buy) that delivers engineering, procurement, construction, maintenance and project management to governments and clients worldwide. Flour is a primary service provider to the federal government that would stand to benefit from any projects, from both The Donald and Clinton.
The company has a $6 billion market cap with a Forward PE of 11, making it a value play with a Zacks Style Score of “A” in Value. It also has a 2% dividend and expected EPS growth of 14%. While earnings revisions have recently been flat, the right candidate could fuel prospects for the company, forcing analysts to raise estimates.
The stock is off almost 50% from its highs two years ago. A Trump versus Clinton election could give a bid to the stock, even before a winner is determined.
Ted Cruz or Marco Rubio Wins
When one thinks of Rubio or Cruz, you think national defense. Both have spewed rhetoric to their constituency, that by building up national defense, they will wipe ISIS off the planet. Naturally defense stocks will benefit.
General Dynamics (GD), Boeing (BA), Lockheed Martin (LMT) and Northrop Grumman (NOC) are the big names in the industry. With the exception of Boeing, they have outperformed the S&P 500 over the last year. If Cruz or Rubio won the election expect these stocks to explode higher. All four of the stocks are currently ranked as Zacks Rank #3 (Hold), so keep an eye on them in the future for revisions higher.
Presidential Election Stock Winners In Summary
The election process can be a painful charade for market participants. As if speculating on what stocks to buy wasn’t hard enough, the election year forces us to speculate on who might win as well. The closer the election polls are, the more uncertainty there is. This uncertainty causes shaky markets that can hold stocks down until the future becomes more certain. Once we have a winner, money will be put to work based on the platform and ideals of that winner.
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