A Few Obama Friendly ETFs

It's easy to identify the economic sectors and specific industries that might have a tougher time with Obama or McCain in the Oval Office; that is, conventional wisdom has its picks and pans for both parties.

Some have argued that the stock market already anticipates a Democratic victory in November at a 70% probability. In addition, Obama is currently projected at about a 57% chance of securing his party's nomination.

How is this playing out in the markets? You may be seeing it in the sagging returns of health care insurers. You may be seeing it in the poor returns of Big Pharma distributors and biotech developers; specifically, they've gone down as much as the market in spite of supposed safe haven credentials. And health care has been the biggest laggard on gains off the January 22 lows.

Ahhhhh... but if it were only that simple. One would think that traditional energy stocks would be in trouble with the anti-Exxon talk on the campaign trail. Not so!

The S&P Select Energy SPDR (XLE) is still performing better than the market at large in 2008. Whereas XLE is down roughly 5.5% YTD, the S&P 500 SPDR Trust (SPY) is down 7.3% YTD.

Obviously, it is easier to talk about what stocks may falter under a particular party. However, most people wish to know: "What's going to work?"

Based on Obama's voting patterns, you'd have to expect alternative fuels to pop higher. Market Vectors Glb Alternative Energy ETF (GEX) has been battered and bruised. However, GEX has been holding up rather nicely since Obama's surge to front-runner status.

The Powershares Global Clean Energy Fund (PBD) has been on a similar path. (Nothing to write home about, but PBD could be a potential benefactor of a major shift in energy policy.)

There's one other area that deserves mention. In Obama's Wisconsin victory speech, he spoke about shifting tax incentives away from multinationals that ship jobs abroad. And, he wants to give tax incentives to upstarts and smaller firms that invest in Americans.

Talk? Words? Perhaps. Yet the day after the Potomac primary victories the iShares Small Cap Value (IJS) gained 2% to the S&P 500's (SPY) 1%. And yesterday, the day after Wisconsin/Hawaii victories, IJS outperformed SPY once again.

Yes...it's probably just a coincidence. Nevertheless, it may be profitable to watch what the candidates are saying on the campaign trail.

Comments

[Orr:]

Additionally, there are growing concerns about water shortages throughout the southeast. Many electric generation sites in this part of the United States rely on water for cooling. Many of these plants were designed and built with certain water availability assumptions that are now very much in question. With growing electricity demand only solar and wind can offer a realistic two year delivery and in areas of the country where water is becoming a concern. The sun still shines and the wind still blows...

There is also the dimension of job growth in parts of the country developing alternative energy technologies. With the dollar falling realtive to a basket of currencies the ability to manufacture value-added products (such as a wind turbine) use them domestically and sell them overseas is starting to take hold. As the automobile industry in the US faulters metal prices should modulate a bit adding to the ability for the alternative energy companies to deliver a competetive solution to coal or natural gas.

The whole story is compelling. I am looking into solar panels on top of my home and I live in the upper midwest.

2008 Feb 24 09:39 PM