In the long-term, the stock market doesn’t care who gets elected president. In the short-term, however, the stated policies and promises of each candidate offers a potential upside for stocks in certain industries.
Here are the industries financial professionals suggest you should focus on in Joe Biden’s first term.
The Firearms Sector
This is a knee-jerk response that you often see talked about when the government restricts the availability of any product. Such actions create supply and demand dynamics that increase sales of the targeted product.
“Typically, Democrats are anti-gun so that people buy guns when Democrats win right after the election to avoid potential regulation,” says Craig Kirsner, President of Stuart Estate Planning Wealth Advisors in Coconut Creek, Florida.
The Renewable Energy Sector
Just like the Obama administration, the prospect of a Biden White House bodes well for the renewable energy sector. For other parts of the energy sector, however, maybe not so well. Kirsner says, “If Biden wins, energy stocks might not do well however clean energy stocks should do very well.”
“Renewable energy is a likely area of investor interest regardless of the election winner, as the notion that we will continue to rely heavily upon fossil fuels seems to be a train that has left the station,” says Tim Barron, CIO of Segal Marco Advisors in Chicago. “Renewable energy can count on support from a Biden infrastructure push.”
After the last debate, it’s clear that Vice-President Biden has a strong view of what he wants to do regarding the energy sector. This has the potential to uproot certain portions of the sector and uplift other parts of it.
“One of the largest opportunities we see with a Biden victory would be in the renewable energy space,” says Jason Field, Financial Advisor at Van Leeuwen & Company located in Princeton, New Jersey. “He has proposed plans to reduce carbon emissions and put real money behind renewable energy infrastructure. This plan is a direct conflict with Trump’s fossil-fuel based energy initiatives.”
The Health Care Sector
This is the sector you probably thought of first. It’s actually more of a mixed bag for several reasons. At the very least, though, there’s a potential for some real clear winners. “Health care stocks might benefit because Democrats are pro Obamacare which subsidizes health insurance and thus should be a boon to those stocks,” says Kirsner.
Except, as we also learned in the final debate, it’s not about Obamacare anymore. It’s now going to be about BidenCare. And that might have significantly different ramifications. Or not. At least until the Covid issue is resolved.
“On the campaign trail, Biden has championed the idea of a revitalization of the Affordable Care Act,” says Paul Z. Shelton Jr., Chief Investment Officer at Warwick Shore Advisors in Orlando, Florida. “Ultimately, if Biden wins, he still has to deal with the Covid pandemic and BidenCare will most likely take a backseat for an indefinite period. Additionally, I believe any potential market volatility from changes in the healthcare mandate were mostly priced in at the onset of the Affordable Care Act.”
The Cannabis Sector
This has been a tempting sector for some time, as many states have dramatically loosened up the restrictions on the use of this substance. There’s been a problem, however. For all the progress at the individual state level, the federal government retains its laws on the books. That may change under a new Biden administration.
“The cannabis industry stands to benefit if Biden wins,” says Peggy Haslach, a financial advisor at The Finity Group in Seattle. “Right now, most advisers and retirement plans cannot work with anyone who profits from the cannabis industry because of federal laws. I see this changing if we have Democrats take the White House, Senate and House.”
There’s a chance, though, that the market has priced this into the relevant stocks. “More market participants already seem to be operating under the presumption of a Biden victory, many sectors have already been affected,” says Barron. “Under a Biden administration, cannabis is a projected winner, with the potential for federal legalization.”
The Technology Sector
Finally, there may be more opportunity to squeeze out of the pandemic.
“Biden has been seen as being more in favor of Covid-related restrictions,” says Ryan D. Brown, a partner and attorney at CR Myers & Associates in Southfield, Michigan. “If that becomes the reality for America in the next few months, technology companies will continue to see surges in their values as more and more Americans become dependent on their technology platforms to work and live.”
When it’s all said and done, as entertaining as it might be to speculate about specific opportunities based on new and continuing federal policies and regulations, in the end, companies will forever continue to survive and thrive no matter which way the political winds blow.
“Elections are often polarizing and emotional, and each party tends to think the world will come crashing down if the opposition wins,” says Brendan Erne, Director of Portfolio Management at Personal Capital in San Francisco, California. “But the reality is very little tends to change. And regardless of which party wins, returns tend to be positive in both the election year and first year in office. Said another way, it’s okay to care about politics, but we believe it’s best to not let presidential elections influence your investment decisions.”