With the primary results now in from Indiana, many pundits have stated we are past the point of no return on the 2016 presidential primaries.
Donald Trump, while still short of the delegate count of 1,237 he needs by the July 18 Republican National Convention, has effectively locked up the nomination now that Ted Cruz has dropped out of the race.
Hillary Clinton was unofficially declared the “winner” a week or two ago, but the former New York senator and Secretary of State stayed in a presidential primary too long herself eight years ago, so she can’t exactly knock rival Bernie Sanders for failing to quit. Sure, the race is reasonably close with Sanders just 300 or so delegates behind Clinton. But the Democrats award delegates proportionally, so even though Sanders “won” Indiana, there’s little chance of him catching Clinton without blowout wins to close the gap. Thus, barring a last-minute scandal to tip the scales or sway “superdelegates,” Clinton remains the establishment candidate.
So now it’s time to stop debating about who’s going to get the nod on each side … and start wondering about how the presidential race will affect your portfolio.
And while there’s a long way until the vote in November, it’s worth considering which publicly traded stocks could benefit under a President Clinton or President Trump.
Here are some ideas to consider:
Donald Trump – Bad for Multinational Stocks
When it comes to trade, Donald Trump is quick to harp on the fact that America has a lot of “bad deals” — most notably, with China. However, if Trump gets his way, there will be plenty of more bad business relationships with China and the rest of the world — this time, coming from the White House and not Beijing.
According to a recent report from The Economist, there is a “moderate probability” that hostile policies from Trump — including threats of as much as a 45% tariff on Chinese goods — will result in a “trade war” with other economies. After all, if we refuse to take in goods from Asia, then we can be assured they will do the same to us.
Not only is this bad for consumers, who will see prices rise, but it’s very bad for U.S. multinationals that depend on overseas business as well as goods manufactured abroad and sold at home. Take Apple Inc. (NASDAQ:AAPL) as a prime example. Would America levy a big tax on iPhones since they are actually manufactured in China? Or would China put the hurt on Apple, seeing as it’s headquartered in California?
Either way, that’s bad for Apple since last quarter its Greater China segment generated $12.5 billion in sales — second only to $19 billion in sales in the Americas and good for about 25% of total revenue.
Same goes for General Motors Company (NYSE:GM), headquartered in Detroit but enjoying a roughly 15% market share in China. Last year, roughly a third of General Motors’ revenue came from outside North America, so tariffs and trade threats could be quite troublesome.
Regardless of where most of the pain falls — at home or abroad — any anti-trade policies from Trump would be categorically bad for big multinationals that rely on transactions across geographies to grow and prosper.
Donald Trump – Good for Guns and Prisons
Of course, Trump proponents are quick to point out that getting tough on things is the reason they like The Donald versus the field.
And lot of Trump’s tough talk centers around crime and the need to protect Second Amendment gun rights.
On his official campaign website, the New York businessman and presumptive Republican nominee talks about the “need to get serious about prosecuting violent criminals” and how “drug dealers and gang members are given a slap on the wrist and turned loose in the street.”
He also sticks to the traditional GOP talking points about gun ownership being a fundamental right and how giving more guns to the good guys is the best way to keep criminals in check.
If you buy those arguments, then you’ll want to buy criminal justice stocks should Trump win the White House — including publicly traded prison operators like The GEO Group Inc (NYSE:GEO) and Corrections Corp of America (NYSE:CXW), as well as gunmakers like Smith & Wesson Holding Corp (NASDAQ:SWHC) and Sturm, Ruger & Company (NYSE:RGR).
Donald Trump – Good for Defense
It’s not just getting tough on the bad guys at home that’s part of Donald Trump’s campaign. As is typical of most conservatives, the reality-TV-star-turned-politician is quick to talk about the need to beef up border controls and defense, even as we take the fight to terrorists abroad before they reach U.S. soil.
On Trump’s official campaign website, for instance, he advocates tripling the number of Immigration and Customs Officers and getting tough by staffing up our borders with better armed personnel.
And while the Democrats are eager to talk about climate change, Donald Trump isn’t so interested in that aspect of energy policy. Instead, he sees the need to take oil wealth out of the hands of Middle Eastern dictators as the top energy priority — including tough talk about destroying ISIS and taking control of its oilfields to cut off any funding sources.
All this would be undoubtedly good for tactical and defense firms. Traditional names like Lockheed Martin Corporation (NYSE:LMT) would benefit from large-scale combat, with ISIS or anyone else, but other firms could benefit simply from an effort that is heavy on funding and rhetoric, even if it’s light on boots on the ground.
Those names include Taser International, Inc. (NASDAQ:TASR), which makes non-lethal weapons and even body cameras for police and federal agencies, which would be a perfect play on increased border and immigration security. Other companies like L-3 Communications Holdings, Inc. (NYSE:LLL) that provide logistics, intelligence and communications support to law enforcement and the military could be decent bets, even if a large-scale conflict doesn’t come to pass.
Hillary Clinton – Bad for Bank Stocks
Hillary Clinton may have taken a bit of ribbing for her speeches in front of Goldman Sachs Group Inc (NYSE:GS), but don’t think that means she’ll go easy on financial stocks.
As a New York senator, she voted for the Dodd-Frank financial reforms. And after a surprisingly difficult primary challenge from the populist Senator Bernie Sanders, Hillary has been forced to move even farther to the left on the topic of bank regulations.
It’s not just a crazy Democratic scheme to crack down on Wall Street, either. In a recent poll, over half of voters think big banks and corporations have too much money and influence — and nearly half think there should be more regulations on the financial sector. That means there’s enough will among the American people to support policies like this, too.
Some of the items on Hillary’s hit list, according to her official campaign website, include imposing a “risk fee” on the largest financial institutions, and restructuring or breaking up firms that are “too risky to manage.”
Jamie Dimon of JPMorgan Chase & Co. (NYSE:JPM) loves to kick and scream about the burden of regulations on banks. But he may understand only in hindsight how nice he and his fellow Big Bank executives had it under Barack Obama.
Hillary Clinton – Good for Consumer Stocks
The Democratic party has long been in favor of higher taxes on the rich and lower taxes on the poor, and the insurgent campaign of Bernie Sanders has fanned the flames on this issue. The idea of cutting out tax loopholes on higher earners could result in relief for the middle class and American consumers.
The wealthiest 1% doesn’t have any problem coming up with discretionary income to spend at the mall or restaurants. But many studies show that a few extra bucks for a family making less than $50,000 is a big difference-maker for the economy, because that money actually gets spent in instead of saved.
Consider research around the payroll tax cuts enacted during the financial crisis, which resulted in an extra $1,000 or $2,000 in annual take-home pay for lower- and middle-class workers. Roughly 36% of all that “extra” money was spent, directly stimulating demand.
There’s also a commitment from Clinton to continue to fight for a $15 minimum wage — something that most economists agree actually stimulates demand by raising the paychecks for unskilled workers, even if it weighs on corporate profits.
Big box retailers like Wal-Mart Stores, Inc. (NYSE:WMT) may not be the best way to play this trend, especially since voluntarily increasing wages has already been a drag on WMT profits. A better bet would be consumer discretionary brands that are connecting with shoppers like Michael Kors Holdings Ltd (NYSE:KORS) or Under Armour Inc (NYSE:UA) or even staples brands like Procter & Gamble Co (NYSE:PG) or Colgate-Palmolive Company (NYSE:CL) that will benefit from bigger grocery bills.
Hillary Clinton – Good for Infrastructure Stocks
Of course, higher taxation on the rich doesn’t have to be passed on in the form of tax cuts for middle- and lower-class Americans. Many on the left decry the state of local schools, roads and hospitals and plead for investment in our future.
Hillary is likely to deliver on this promise, given the necessary need to appease 20-something voters energized by Bernie Sanders. And given that Hillary Clinton has already identified a solution to our “infrastructure gap” involving a five-year, $275 billion plan, and you can bet she’ll work with Congress to push more money toward government projects if she reaches the White House.
Remember, however, that government spending doesn’t mean federal employees are laying concrete or hauling dirt. Private firms are the beneficiaries, and that means more money for construction companies that use Caterpillar Inc. (NYSE:CAT) machines and more money spent at publicly traded building materials companies like US Concrete Inc (NASDAQ:USCR) or Martin Marietta Materials, Inc. (NYSE:MLM).
Of course, Donald Trump could be good for one specific infrastructure stock if he beats out Clinton — Cemex SAB de CV (ADR) (NYSE:CX), a Mexican concrete company.
After all, Trump will make our neighbors to the south build his wall, right?
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
