Breakout

Election 2012: Sector Winners & Losers

Jeff Macke
Breakout

Day-trading off election results is for pikers and degenerate gamblers, but adjusting your portfolio based on who occupies the White House makes sense for the long term. To help investors determine which sectors they should elect to put in their portfolios once we have a winner, Breakout welcomed Sam Stovall, chief equity strategist for S&P Capital IQ.

Stovall says the fundamental picture for the homebuilding sector (XHB) would get a shot in the arm should the President get re-elected. "The Democrats are looking to stretch out the foreclosure process," he explains, "That's going to keep more existing homes off the market." By the immutable laws of supply and demand, fewer homes on the market mean higher prices for existing homes, making buying new one a more appealing alternative.

The fundamentals are going to dominate the price action, regardless, and they aren't going to change radically no matter who wins today. "I don't think you're going to see industries that are totally shut out regardless of who gets elected," opines Stovall. He points to Telecom (XTL) as one group that wins either way. The yields may be devalued under a planned dividend tax hike but plans to give the elderly and lower class access to affordable service means the companies win either way.

If there's any difference between the candidates, Stovall says it's a matter of the Republicans being the party of less regulation. That being the case, Stovall says investors would be able to focus more directly on the fundamentals of the core businesses rather than potential regulatory influences that would exist if Obama wins another term.

There's plenty of time to make changes to your book as needed, but making wholesale alterations based on the election is a road to wealth for only one person and it's not you. As Stovall says of such politically motivated trading, "That's only going to benefit either the full-service or the discount brokers in terms of the transaction fees."

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