Last week, I did an interview with Nerd Wallet about investing around the election. You can read the article on their site.
I brought a bunch of charts along for it so figured I’d share some with you.
As we prepare for the voting booths to close and brace for the market's reaction tonight, here are some things I’m thinking about.
I think the uptrends that are already in place, will remain in place. Maybe some post-election volatility will give us the opportunity to get into these trends at a discount.
As for some of the ranges that are in place right now, I think odds favor the election serving as a catalyst to break them out, not down.
I’m thinking of areas like banks, biotechs, and speculative growth. Small caps, too.
These groups all look like they want to break out to the upside.
Speaking of banks, if I had to pick one election winner among the industry groups, they would be it.
If Trump wins, the market should continue to price in deregulation, and will eventually get it in a bigger and better way than it would under a democrat. This means bigger buybacks and dividend increases across the board.
I think that makes sense. But it’s not about what I think. The market thinks it, too.
This is a cool chart of Trump’s betting odds overlaid with the Regional Bank Index $KRE.
Stanley Druckenmiller echoed similar sentiments about the banks being a “Trump trade” in a recent Bloomberg interview.
However, I also think we need to be careful about expecting a certain performance from a certain group of stocks simply based on who is in the White House.
Here are some examples of how that strategy would not have worked over the last two presidential terms.
With Trump in office, you’d think solar energy would struggle, right?
Well, they were actually among the top-performing industry groups.
It wasn’t until Biden took office when these stocks started struggling. They were actually among the worst performers under his term.
Next, is coal. It’s the same story here.
Trump was supposed to be so good for coal. As it turns out, he wasn’t. Maybe it had more to do with the pandemic…
Under Biden’s term, coal was a top performer.
Maybe it is just that there were more important things going on and driving the price action for these two groups of stocks… maybe they mattered even more than who was president.
That will probably be the case again regardless of whoever takes office next. There will always be other things that impact prices more than politics.
Along those lines, maybe the FOMC meeting later this week is more important than the election tonight?
Who knows. I’m just trying to ask the right questions.
