Winning and Losing Sectors for the Obama Administration

Which sectors will benefit, and which may underperform, in the new President Obama Administration?  This is my analysis of what groups could see outperformance over the 1 to 2 year "honeymoon" period of the new Administration, and which may lag.  Some of this may already be priced into the "conventional wisdom", but it is important to keep in mind the bigger macro trends underlying your shorter-term trading and investing. 

Likely Winners:

Alternative Energy - Expect major government initiatives and investments in the Alternative Energy field, intending to move us away from our reliance on Foreign Oil.  This may well include such broad areas as wind, coal, water-based, nuclear, ethanol, etc.

Infrastructure - In conjunction with the above, I foresee a possible major re-directing of funds (likely from the military) to a possible large-scale public works project.  This may benefit some large engineering, consulting, and construction companies.

Biotechnology - In line with a forward-looking agenda, I see continued promotion of advances in modern biotechnology versus the interests of old-line healthcare and pharmaceutical companies.

Internet Retail - This is the flip side of possible negative effects on old-style brick-and-mortar retailers that I examine below.  The low labor costs of Internet Retail should enable that group to benefit and continue to grow and gain market share.

Education - I foresee major initiatives to increase the number of Americans achieving a 2 year technical degree or higher.  This should benefit the private education companies, in addition to the public sector.

Likely Losers:

Brick and Mortar Retail - There is a strong likelihood of a significant increase in the minimum wage, in my view - retailers are the ones who will be most affected by this.  In addition, an increase in unionization and union political power (which may end up being less than some anticipate), could also possibly hurt the large names in this sector.

Defense - While this may not be as drastic as some are guessing, there will certainly be a slowdown in defense spending growth and a re-allocation of funds to domestic projects.  Both of which will not benefit companies that have benefited from overseas wars.  In addition, there may be an overall world lessening of tensions, which may decrease the growth overall of global defense spending.

New Homebuilders -- While I anticipate initiatives to protect homebuyers and to safeguard against another credit crisis, I do not see any need or help given to new homebuilders of suburban-type homes.  I expect attention and resources to help improve urban areas and existing homeowners.

There is still a great deal of uncertainty as to what President-elect Obama's focus and energy will be expended on, especially in the first part of his Administration while his political capital is strong.  He may still get bogged down in fixing the credit/financial crisis for some time - and may have to bail out some large manufacturers, as well.  But overall, I see him looking for big-picture, forward-looking projects, combined with rebuilding our nation's cities and infrastructure.

Disclosure: Moby Waller currently has an open bearish options position in a Retail, Defense, and Healthcare stock for his Advanced Options Strategies advisory service, and a currently open bullish options position in a Medical Device stock.

Comments

[bosun.j:]

Those pesky laborers! What are we ever to do with them?

Wal-Mart pays slave wages and demands the souls of their employees. Costco pays a living wage and good benefits. Wal-Mart would have to raise it's prices one cent per item to pay union wages and benefits to it's workers. Yes indeed, one cent per item. The sky is falling!

Defense needs to be cut drastically. Period. Blackwater and KBR have suckled at the public teat long enough!

As for the rest of your article, I agree.

2008 Nov 07 04:42 AM

[User 225971:]

Thanks for taking the other side of the trade. I knew there were idiots out there buying my sale of solar stocks.

2008 Nov 07 08:57 AM