A president’s policies can help lift the stock prices of certain types of companies and depress shares of some others. For instance, whether or not you like the Affordable Care Act (also known as Obamacare) as policy, there’s no question that it has helped push up prices of health-care stocks, which have outperformed all other major sectors over the past five years. At the same time, coal stocks have plummeted, largely due to President Barack Obama’s initiatives to reduce greenhouse gas emissions.
Wall Street already is trying to figure out which stocks might benefit or suffer under the next US president, depending on which one of the two Democratic candidates or three Republican candidates in the race is elected. Of course, there are limits to how much a president can influence policy, especially if Congress is controlled by the opposing political party.
Bottom Line Personal asked stock picker and trend spotter Hilary Kramer to analyze how the candidates might affect the market and individual stocks. Under each political party, the candidates are listed in order of most to least primary delegates as of April 15…
Hillary Clinton. Wall Street, which hates uncertainty, feels a strong comfort level with the possibility of a Clinton administration because of her long political track record. The former secretary of state’s domestic policy goals are more moderate than those of President Obama, and they’re unlikely to roil the stock market. Although Clinton supports the financial regulatory reforms adopted after the 2008 financial crisis, she would likely refrain from imposing major new restrictions on banks. And whether or not you credit Bill Clinton for market gains during his presidency, from Wall Street’s perspective it doesn’t hurt that the Standard & Poor’s 500 stock index more than tripled during his tenure.
Likely stock winners…
Allscripts Healthcare Solutions (MDRX) and Quality Systems (QSII), two electronic medical-record providers. Clinton would try to expand the Affordable Care Act. These companies stand to benefit as the number of health-care consumers increases and health-care companies look to become more efficient.
SolarEdge Technologies (SEDG) makes electronic products that improve the performance of solar panel systems. Clinton has proposed a national goal of having half a billion residential solar panels installed by the end of her first term.
Likely losers: Small biotechs such as Regeneron Pharmaceuticals (REGN), whose $14,600-a-year drug Praluent reduces high cholesterol levels. Clinton has taken a hard line against excessive prescription-drug pricing. That could lead to some sort of limited federal drug-price controls.
Bernie Sanders. Victory by the Vermont senator, who has been heavily critical of financial institutions, would be a major shock for Wall Street. Sanders’s goals would amount to a historic redistribution of wealth in the US economy. He has proposed a doubling of the federal minimum wage, which would especially affect retailers and fast-food chains, as well as big tax hikes for many Americans. Sanders wants to return much of that increased tax revenue to the public in the form of a government-run universal health-care insurance system.
Likely stock winners…
Tesla Motors (TSLA), the electric-car maker. To decrease pollution, Sanders wants to impose a carbon-emissions tax and have the government build a network of electric-car charging stations.
Caterpillar (CAT), the construction-equipment manufacturer, and Cisco Systems (CSCO), which provides equipment for telecommunications and utility power grids. Sanders has said he will use higher tax revenue to fund $1 trillion in rebuilding and upgrading highways, bridges and power grids.
Likely losers: JPMorgan Chase & Co. (JPM) and other major banks. Sanders has pledged to break up any “too big to fail” bank, insurer or financial-services company whose collapse might pose a catastrophic risk to the US economy.
Donald Trump. Parts of Trump’s agenda seem business-friendly, including a proposed cut in the corporate tax rate to 15% from the current 35% and the creation of a low 10% repatriation tax on the foreign profits of US companies to encourage them to invest that money back in the US. At the same time, Trump has created enormous uncertainty among investors with his minimally detailed policy proposals and shoot-from-the-hip style. His “America First” foreign policy, including threatening to impose a big tariff on Chinese imports, could hurt global free trade and alienate important allies.
Likely stock winners…
US Steel (X). An economic trade war with China could boost the fortunes of US basic-materials manufacturers.
CTC Media (CTCM), which runs major Russian TV networks, and Mobil Telesystems (MBT), Russia’s largest wireless phone operator. Trump’s praise of Russian president Vladimir Putin could translate into a thaw in economic sanctions against Russia.
Likely losers: Archer Daniels Midland (ADM) and Bunge Ltd. (BG). These agribusiness giants could suffer in a US-Chinese trade war because they are leading producers of soybeans, the largest single US export to China.
Ted Cruz. The Texas senator wants to abolish the IRS, replace personal income tax brackets with a single 10% federal flat tax, eliminate most other major taxes such as the payroll tax and estate tax, and get rid of most deductions. Businesses would pay a flat tax of 16% on their net revenues. Wall Street is afraid that these changes would add trillions of dollars to the national debt.
Likely stock winners…
Northrop Grumman (NOC), Lockheed Martin (LMT) and other big military contractors. Cruz has proposed ramping up defense spending to at least 4% of gross domestic product (GDP) from its recent 3.2%.
Likely losers: HCA Holdings (HCA), LifePoint Health (LPNT) and other companies that run hospitals and surgical centers. Cruz would seek a complete repeal of the Affordable Care Act.
John Kasich. Wall Street believes that Kasich’s proposals have been very consistent with the centrist actions he has taken as the Ohio governor and a former congressman. Kasich says he wants to leave Wall Street alone and focus on balancing the federal budget, improving the economy and increasing employment by cutting the business tax rate and raising the earned income tax credit by 10% to help low-income earners.
Likely stock winners: Health-care benefits providers such as Aetna (AET) and UnitedHealthCare (UNH). Kasich is likely to be far less disruptive to the Affordable Care Act than his party’s other candidates. As governor, he accepted extra Medicaid dollars from the federal government and believes access to affordable health insurance is vital.
Likely losers: For-profit education companies such as Apollo Education Group (APOL) and Grand Canyon Education (LOPE). One of Kasich’s passions has been to make the public college system affordable. Similar initiatives nationwide could attract more students to public schools and hurt for-profit colleges.
