Presidential debate on financial markets

Voting in the 2016 elections is almost like picking between the lesser of two evils. Both candidates have strong accusations against them for a variety of reasons and the increasing partisanship just comes to show how split people are between the two candidates.

What would a Trump election mean for the market? What would a Clinton election mean? How do we best reposition our portfolio according to the our speculation of the election? Lets find out.

Trump tells us he’ll renegotiate with China, reduce national debt, bring jobs back to the United States, increase police and military, and reduce taxes for the wealthy and corporations. How is he going to do all of that? Cutting taxes would just allow debt and our expenses to pile up, where is the military funding going to come from, printing more money?

Truth be told, investors fear a trump nomination. Foreign investors may sell their positions, leading to a increased sell off in the U.S markets. Considering how first presidential debate, it doesn’t seem that markets agree with the idea that Trump would “make America great again”.

After a night of Hillary questioning Trump about his tax returns, Trump’s excuses, and unbacked arguments, the future market rallied up to 0.75%, without interference from any other catalysts. In addition US markets fell dramatically against the Mexican Peso during the election. Showing that the decreased likelihood of Trump stopping immigration drove the currency up. The market celebrated an unofficial Hilary victory over Trump it the debates.

According to predict wise, the chance of a Trump victory decreased 6% after the debate, and led to a increase in roughly 0.75% of the overnight futures market. The idea of a unexpected trump victory at 100%/6%= 16.66 *0.75% may mean a market decline of 12.5%. So expect a correction in the market if Trump is to become president.

Trump just has so many unknowns. What are his economic policies? Will he really start to cut out international trade with China? Will he build a wall? Trump brings a great deal of uncertainty which is something investors hate.

Arguably, a Clinton victory would lead to more predictable policies and policies that are more so similar to what we have now under Obama’s presidency.

In my opinion, the best way to prepare for the election is to stay calm and don’t play into the market fears. You can best position your portfolio by considering different sectors and stocks that would rally following a Trump/Clinton win.

The best way I would prepare for a Trump election would be to own stocks in defense, prison, petroleum and construction companies. If Trump and his supporters were to really build a wall, that would be huge for the construction industry. A CNBC analysis puts the total cost of the wall/border at $15 billion to $25 billion. Moreover, Trump has often talked about increasing military spending, and locking up more criminals. Trump would support oil production companies to order to reduce reliance on the OPEC countries.

The best way I would prepare for a Clinton election would be to invest in healthcare stocks, and renewable energy. Renewable energy is going to be huge given that Clinton stated she intends to install 500 million solar panels. Clinton also supports Obama’s healthcare system and plans to invest $2 billion per year into Alzheimer’s disease research.

References:

http://seekingalpha.com/article/4008637-presidential-election-will-impact-stocks-cramers-mad-money-9-26-16

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