Global Markets, Meet President Obama. Now What?

by: Ryan Barnes

Well, history has been made. Barack Obama has taken a staggering 338 electoral votes, and has won the Presidency by what, in political metrics, is an all-out landslide. Just because I’m not 100% sure I’d already revealed my hand, I will say that I fully believe we’ve elected the right man for the most important job in the world.

The Appetizer Cake Is Already Baked In…

Markets have likely priced in the majority of Tuesday’s result; the Democrats now control at least 55 seats in the Senate as well as the White House. All the fast tracks and H.O.V. lanes will soon be opened for whatever programs and legislation our government leaders wish to enact.

The devil’s advocate in me (a welcome voice for any investor) says that fewer checks and balances (under a Democratic legislature and Administration) is not a good thing. However, a bigger, more visceral part of me remains utterly frustrated by the actions (or lack thereof), since the original incarnation of the Paulson Plan met the world’s largest dog and pony show, six weeks ago.

Ahead is the Only Direction that Matters

Ready or not, the Obama train is heading out of the station, so it’s time to start analyzing the changes within sectors, industries, and the broad U.S. markets we can expect to see. There was a good rundown posted on Bloomberg this morning. Below are the highlights:

Industries at risk for higher taxes, growth limitations

  • Integrated Oil companies: These are probably safe in the short term and at risk in the medium-term for windfall taxes, because of fewer tax breaks. Offshore production plans in the U.S. could be stalled or scrapped altogether.

  • Energy E&P companies: There will be offshore drilling risks, and increased funding for alternative energy production.

  • Big Pharma, Biotech: There will be tougher negotiations for lower drug prices via Medicare, and possible competition with lower-priced drugs from Canada.

  • Airlines: They will experience higher labor costs.

  • Leisure and other labor-intensive industries: There will be higher labor costs and an easier path to collective-bargaining agreements for workers.

  • Media: Obama has expressed a desire to open up local markets and restrict the “cornering” of local markets by big media conglomerates. We can also expect fewer mergers as antitrust policies will be tougher under Obama.

Industries that could see tailwinds

  • Autos: Obama has promised to “fast-track” money to the Big Autos - $25 billion was appropriated in late September but it still hasn't been distributed. In previous statements, Obama has expressed desire to allocate $150 billion over 10 years to fund alternative energy and hybrid cars.

  • Alternative Energy: Solar, Wind and Natural Gas should all see growth via tax credits and other incentives, as well as increased levels of private and government funding. The possible institution of a carbon cap and trade system would really catapult this group, but don’t expect to see anything for a couple of years.

  • Industrial equipment and service providers: Obama will likely allocate capital towards infrastructure improvement projects like roads and bridges. Caterpillar (NYSE:CAT) was mentioned in the Bloomberg article as a particular beneficiary.

  • Technology: Obama generally wants to promote higher R&D funding, net-neutrality. A recent survey of tech executives found that over 60% felt Obama would be better choice for technology development.