Stock ETF Investors Could Win No Matter Who Is President

by: Tom Lydon

While both Mitt Romney and President Barack Obama claim the other will drag the U.S. economy down, stocks and exchange traded funds will likely continue to expand as the markets gain momentum.

Consumer spending is rising, employment numbers are improving, home prices are recovering, and banks are dishing out loans again, report Rich Miller and Steve Matthews for Bloomberg.

Peter Hooper, chief economist at Deutsche Bank Securities, cites pent-up demand as the main driver for economic expansion ahead. Since households have tightened their belts during the recession and its aftermath, consumers are now beginning to feel more optimistic

"Housing typically adds 1 to 2 percentage points" over a recovery, Dean Maki, chief U.S. economist at Barclays Plc, said in the Bloomberg article. With less distressed properties on the market, "you may get a bigger kick from housing" in 2015 and 2016.

"The die is cast for a much stronger recovery," Mark Zandi, chief economist for Moody's Analytics Inc, said in the Bloomberg article, projecting an economic expansion of about 2% next year before doubling to around 4% in 2014 and 2015.

Eric Green, a fund manager at Penn Capital Management Co., believes GDP "will surprise to the upside. We could grow at a 3 to 4 percent rate over the next couple of years."

However, the caveat is how the President-elect will manage the $1.1 trillion federal budget deficit -- the Congressional Budget Office has cautioned that the U.S. could drop into recession if over $600 billion scheduled government-spending reductions and tax increases automatically kick in after the "Fiscal Cliff."

Green points to manufacturers, materials producers, energy and technology sectors for the rosier outlook.

  • Industrial Select Sector SPDR Fund (NYSEARCA:XLI)
  • iShares Dow Jones US Industrial Sector Index Fund (NYSEARCA:IYJ)
  • Materials Select Sector SPDR Fund (NYSEARCA:XLB)
  • Vanguard Materials ETF (NYSEARCA:VAW)
  • Energy Select Sector SPDR Fund (NYSEARCA:XLE)
  • Vanguard Energy Index Fund (NYSEARCA:VDE)
  • Technology Select Sector SPDR Fund (NYSEARCA:XLK)
  • Vanguard Information Technology Index Fund (NYSEARCA:VGT)

On the other hand, "defensive" sectors, like real-estate investment trusts, health-care providers and consumer staples, will not do as well.

  • Health Care Select Sector SPDR Fund (NYSEARCA:XLV)
  • Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP)

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.