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President Donald Trump: The U.S. Economy’s Winners and Losers

As improbable as it might have seemed even a few months ago, the prospects of a “President Donald Trump” are very much on the table.

President Donald Trump: The U.S. Economy's Winners and Losers

One of the most accurate predictors of presidential elections over the years has been the University of Iowa’s Presidential Election Electronic Market, which is currently predicting a win for the democratic nominee, Hillary Clinton, by a significant margin.

Between now and then however, there’s high potential for game-changing events between Clinton’s email server to Benghazi woes and Donald Trump’s occasional foot-in-mouth/that’s-not-what-I-meant moments. Others polls suggest a tighter race, which means the election as well as the “will they or won’t they boost rates?” question at the Federal Reserve will no doubt make us all feel like we are in a drawn-out tennis match during a long, hot summer, begging for it to be over.

But for now, Donald Trump is very much gaining on (and leading against) Hillary Clinton in a number of polls. And thus, as investors, we should take into account how President Donald Trump could affect the U.S. economy and the stock markets.

President Donald Trump on Healthcare

A win for Donald Trump would mean, at the very least, an attempt to completely repeal the Affordable Care Act, aka Obamacare. Whether or not that is possible given the post-election House and Senate party allocation remains to be seen. Trump also wants to allow insurance to be sold across state lines, and he wants premiums for individual health insurance to be deductible, the same way they are for businesses.

A Trump win could mean a major shakeup in healthcare that likely would result in lower insurance premiums for many as well as lower regulatory costs for carriers. But today, at least, it’s too early to get a handle on which sectors would be impacted the most.

The polar views on healthcare between the two candidates makes the already murky outlook even more cloudy for underperforming stocks thus far in 2016, such as Humana Inc (HUM) and UnitedHealth Group Inc (UNH). Both companies have already waved the “get me out of here” white flag when it comes to the ACA.

President Donald Trump on Jobs

Donald Trump wants to reduce the corporate tax rate to 15%. The more money companies are able to keep, the more they can reinvest in their own growth and the more people they can hire, so that’s a positive for jobs.

On the other hand, manufacturing may suffer under Trump as his desire to implement a hefty import tax will hurt this sector. Roughly 50% of what the U.S. imports is used as a raw material or components for U.S. manufacturing. Increasing the cost of inputs to our domestic manufacturing will mean either raising prices or reducing margins, both of which affect our global competitiveness.

As the data from a number of sources has shown, the domestic manufacturing and industrial economy is already in a recession. A strong import tax would likely prolong and worsen this.

President Donald Trump on Infrastructure Spending

In Trump’s 2015 book Crippled America, he talks about how the nation’s entire infrastructure is crumbling and promises that fixing it would spur economic growth. Earlier this year in a speech, he mocked America’s old-school train system in comparison to China’s high-speed/high-tech systems.  Trump also has mentioned how the money spent on overseas wars could have been used much more productively by modernizing the nation’s infrastructure.

While he hasn’t given any specific plan, he has described his vision as a “trillion-dollar rebuilding plan,” which would be “one of the greatest protects this country has ever undertaken.”

Then there’s that wall …

The reality is, we’ll probably see a push to increase infrastructure spending under either Clinton or Trump.  This talk could spur shares of construction equipment and other infrastructure players from Caterpillar Inc. (CAT) and Chicago Bridge & Iron Company N.V. (CBI) to Granite Construction Inc. (GVA) and materials companies like Vulcan Materials Company (VMC).

Before one gets all hog-wild, let’s recall that shovel-ready projects, much like unicorns, sound nice but are rarely if ever spotted.

President Donald Trump on Defense

Donald Trump and Hillary Clinton have both also given considerable rhetoric to upgrading America’s defense capabilities. Throughout her career, Clinton hasn’t exactly been opposed to using the military, and Trump has made his position on this clearer than most, so what we are really talking about here is a question of degrees.

Trump looks to be primarily focused on improving the nation’s traditional military strength, which is a tailwind for companies like Boeing Co (BA), Northrop Grumman Corporation (NOC) and Lockheed Martin Corporation (LMT).

Unlike Clinton, Trump is a staunch supporter of the Second Amendment, to the point where he has a concealed carry permit himself, so we would expect much less support for gun control coming out of a Trump White House, which makes more less regulation facing companies such as Smith & Wesson Holding Corp (SWHC) and Sturm Ruger & Company (RGR).

Chris Versace is a co-founder and the Chief Investment Officer of Tematica Research, which publishes the Monday Morning Kickoff, the long-only Tematica Investing newsletter and the trading service Tematica Pro, which uses a combination of long-short investing and options.

Lenore Elle Hawkins — co-author of Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns with Versace, and founder of Meritas Advisors — contributed to this report.

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