As the election winds down, what can we expect from the markets based upon who wins? What opportunities exist and what should our investment philosophy be?
Sectors that do well under Romney
A good place to invest may be stocks in the financial and education sector if Romney is elected, because these groups stand to benefit. Mark Flannery of Credit Suisse describes it this way:
"While we do not expect a repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a more "balanced' approach to bank supervision and future bank reforms are likely to be viewed favorably. We think a Republican administration would be a positive for bank stocks"
Under Obama's watch in 2012, the education sector dropped 45% as the administration redid the federal student aid program. If Obama has a second term, another round of initiatives will cut into earnings for these companies. But if Romney wins, these initiatives will not take place and companies like DeVry Inc (DV) and Bridgepoint Education (NYSE:BPI)-just to name a few, will be able to rebound.
Another sector that could prosper if Romney wins is managed healthcare. He has promised to dismantle Obamacare right away if he wins. There is a 2.3% excise tax medical health care stocks and medical device makers will have to pay under Obamacare. Companies like Wellpoint Inc (WLP) and Life Science Holdings (NASDAQ:IART) will benefit under Romney.
Watch Deep Sea Drillers
Deep Sea Drillers Suffered under Obama after the BP spill in the gulf coast. It's the U.S. Bureau of Safety and Environmental Enforcement, which regulates domestic offshore drilling, and after the spill, it restricted the access to new deep-sea drilling permits. They went from 106 in 2007 to 32 by 2010. It's the deep sea drillers that have suffered. Gulf drilling companies have seen stock prices fall. But if Romney wins, this may be a good sector to invest in. Romney has stated offshore drilling and additional permits would be the foundation of his new energy policy. Deep sea drillers could see their misfortunes turn to fortunes. These companies have taken a hit the last couple years and could be a "black gold mine."
Wealthy will spend More if Romney wins
A poll shows that affluent business leaders plan to invest more, spend more and put more money into their businesses if Mitt Romney wins the election. 39% of the business leaders would increase investments in their companies if Romney wins while the markets as a whole would increase spending by a third. But if Obama was in for a second term, 32% would decrease or hold back investments while 37% in the market as a whole would reduce spending.
Regardless of who wins, most investors may be sitting out. Maybe it Doesn't Matter Who Wins
More U.S. investors believe stocks will do better if Republican challenger Mitt Romney wins the presidential election than if President Barack Obama is re-elected and they would also take more risk in their investments. Nevertheless, most would stay on the sidelines regardless of who wins because there is major concern with uncertainty. The looming fiscal cliff of automatic spending cuts and tax increases takes place January 1st 2013 (unless congress acts) For this reason most investors see themselves in a hold pattern for the immediate future.
I am not sure how much our politicians will accomplish. There is a no compromise battle going on in Washington and it is unhealthy for the country and there is no sign hostilities will recede anytime soon. I am not sure if Obama wins, another stimulus of his will do any good (if he can get one through). Can Romney really lower taxes? It will be hard and I am not sure either will be able to spark much growth in the next couple years. It is not logical to consider lowering our outrageous deficit by spending cuts and tax increases, this will just keep the economy moving along at a snails pace.
Federal Reserve Chairman Ben Bernanke continues to print money but all the Fed bailouts, loans, credits, and money printing have done nothing to create long lasting wealth and a healthy economy. Are we headed toward a major global crisis?
Will it make a difference whoever is in the White House the next four years? 2013 is going to be a challenge for either candidate. The economy is going to be slow-going, high unemployment, and high debt. Some economists that have been polled believe the economy could fall another 2% and recession looms close! This belief by some analysts may not be far off from reality. Between 2000 and 2010, Wall Street lost and inflation-adjusted 20% in value from retirement portfolios for 95 million Americans. The markets moved between 6400-14,000 and there is no reason it cannot do the same thing now. It is highly unlikely that neither Obama nor Romney will be able to fix the immediate problem in the next four years. So what should an investor do? Get defensive in your investing. We still have political warring going on and it is unlikely to end soon. There wars will continue to drive markets down.
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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.