ETFs for the Presidential Election

ETF Trends

Investors are aware of the impact the Presidential election will have upon markets and exchange traded funds. With voters set to hit the polls in about two months, many are strategically placing capital in sectors that will be affected by who ends up sitting in the White House.

“The S&P 500 Index rose on average 12.1% with a Democrat in the White House, as compared to 5.1% with a Republican occupant. Further, since 1949, U.S. real GDP increased a median 4.2% per year under a Democrat vs. 2.6% under a Republican. However, there are many more sectors and industries that S&P Capital IQ equity analysts think will benefit more if Governor Romney wins the election over President Obama,” Sam Stovall wrote in a recent S&P Capital note.

Health care stocks and ETFs such as the Health Care Select Sector SPDR (XLV) are an obvious sector that could benefit should President Obama get re-elected. S&P Capital rates XLV “Overweight” and the fund has gained 16.2% year-to-date.

“Health care is likely the most obvious sector that would benefit from President Obama holding on, as health care reform would proceed unabated,” S&P Capital IQ said in the note.

The telecom sector is also expected to benefit from a Democratic take over. The Vanguard Telecom Services ETF (VOX) is up 21.5% year-to-date and is rated “Marketweight” by S&P Capital. Obama supports broadband expansion, and the Federal Communications Commission’s chairman has been a proponent of moving wireless spectrum from television broadcasters to telecom carriers. [Why Telecom ETFS are Beating the S&P]

Under the Romney administration, the financial services sector will be able to impose less strict provisions. The iShares S&P Global Financials Sector Index Fund (IXG) will benefit from less pressure on the industry as a whole.  Diversified banks make up 43% of the ETF’s assets, including Wells Fargo, while other diversified financial services stocks such as Citigroup add another 8%. [How Financial ETFs May Benefit as Banks Get Safer ]

The iShares Dow Jones Transportation Average Index (IYT) will benefit under the Romney Administration as well. IYT has 34% of its assets in railroads, such as Union Pacific, and 20% in Trucking, such as Landstar Systems. [ETFs to Track Market Sentiment]

“The current administration has worked against the coal industry and coal-fired plants, by adding regulations. Coal accounts for about 25% of total railroad revenues, and our analysts think that the rails would benefit from further encouragement of drilling in shale regions since they transport much of the needed pipe and sand along with outbound oil products,” S&P Capital said.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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