Assume President Hillary Before Investing

Investment insouciance in the face of the 2016 general election might cost you dearly in 2017. The looming election will have large consequences for the economy and, by extension, our portfolios. Taxes will be lifted or lowered; deficits will widen or narrow; monetary officials will be replaced; oil will be either demonized or championed; foreign policy will become more muscular or more reticent; free-trade will be in the political cross-hairs by virtue of fresh-faced, ultra-liberal and ultra-conservative characters elected to the Congress. 
 This early in the primary season, it’s difficult to predict who will be running against whom in the presidential contest; but it’s not too early to start making highly educated guesses that can preposition your portfolio for 2017 and beyond.
 The Iowa Electronic Markets, which traditionally out-forecast the political polls, indicate that Democratic control of the White House and Senate is baked in the cake. I hear you: Past performance is no guarantee of future results. Nevertheless, an exceptionally strong track record should not be summarily dismissed.
 Hillary in the White House (absent an indictment for breaches of national security while Secretary of State) with a Democrat-controlled Senate translates into four more years of gridlock. Investors in the energy sector can take comfort that the drillers and refiners will not be stripped of their tax breaks, as Clinton has promised. Investors in the defense sector should prepare for budgets about the size of the current one- around $500 billion. Republicans would like to spend at least $100 billion more on the military.
 Gridlock has its charms. Drillers, for example, were the largest source of capital investment and high paying jobs up until the oil glut struck in the middle of last year. Clinton would hit them when they are down, taking away their tax deductions while increasing tax breaks for producers of green energy. This is “Creative Destruction,” government style, which, if ever implemented, would end badly to end badly, dragging down GDP growth.
 Uber did not require the total destruction of the taxi cab industry in order to compete. Email did not require the eradication of the U.S. Postal service to thrive. Both entrants grabbed huge chunks of market share simply because they were great ideas, not because they had powerful political patrons. To take down the carbon industry and replace it with a technology still incapable of standing alone in a free market is reckless.
 By Clinton’s own reckoning, Obama’s aggressive, anti-carbon policies inflicted $30 billion in damage on coal mining communities alone. At least, that’s the size of the government program she proposes to rebuild them. 
 Infrastructure plays should have an important place in our portfolios. When the nation no longer can trust its tap-water, it’s time to lay in new pipes. Flint Michigan and Philadelphia both have had lead-contamination issues. There are hundreds of cities and small towns across this country with water mains dating back to the early 20th century. Flint cannot be ignored by either party. Neither can that dump fire near a nuclear waste site proximate to St. Louis. Clinton is promising a big infrastructure spending boost and GOP candidates similarly are making infrastructure pledges. This is the populist thing to do. I foresee bi-partisan support for more infrastructure in the next congress. This fiscal boost should goose our GDP.
 Having another Clinton in the White House might be a scenario that makes some of you seethe. You can vote against her in the voting booth. But it would be self-defeating vote against her when rebalancing your portfolio.

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