How to Trade Equity Sectors Into the Election

Markets hint at election caution as voting in U.S. presidential election begins. Democrat Hillary Clinton held a narrow lead over Republican Donald Trump in most pre-election polls. Analysts assess potential impact on sectors and stocks, including banks, healthcare, defense, energy, construction, consumer staples and tech/media after Donald Trump has won the Presidency.

FINANCIALS:
Banks, financial cos. may gain with Clinton or Trump as president, amid rising spending, potentially higher interest rates, as either tries to boost growth
All eyes will be on potential Fed replacements and on rates

INSURERS:
Trump victory would likely send Treasury yields lower, hurting life insurers such as LNC and MET: Bloomberg Intelligence
Trump would likely dilute Dodd-Frank, possibly taking away the SIFI status of PRU, AIG; while that’s a plus, both would suffer from any extended decline in interest rates
Property and casualty insurers including ALL, CB, TRV might outperform on a relative basis.

HEALTHCARE:
Health-care stocks have been volatile in the weeks leading up to election on concerns a Trump win may lead to changes to Affordable Care Act. Trump victory seen as more negative, though could bolster pharma/biotech stocks

DEFENSE:
Defense stocks may gain with either Clinton or Trump as president, with both favoring higher budgets, analysts say
BofAML says best-case scenario is Republican president and Senate: model shows defense budget authority growing 13%-14% through 2021 vs 0% for Democratic president, Senate and Republican House
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ENERGY:
Trump presidency may be positive, mainly by removing (or deferring) regulatory risk
Coal: Trump win would benefit coal-based generators such as NRG, DYN, Luminant; may hurt SRE due to Mexico exposure: Wolfe
Renewables/Solar: Clinton win would likely lead to solar rally, Baird said last month; cites platform on accelerating investment in clean energy manufacturing and infrastructure
Canaccord sees Trump victory overall negative for renewable power sector; coal-fired plants may also remain open for longer than expected under Trump

GOLD:
Clinton win likely to keep gold prices flat to slight negative, while Trump presidency may give gold a boost on uncertainty
Bloomberg Intelligence noted that a survey among attendees of LME Week Forum suggested likely gold rally if Trump wins
CIBC previously said Trump victory would be “boon” to risk-off assets and would be “reasonable bet” that gold would rally further; HSBC has recommended buying gold no matter who wins the election, says will see at least 8% jump whoever wins
JPMorgan recently upgraded NEM as an “election stock pick”

HOUSING/CONSTRUCTION:
Either Clinton or Trump would be bullish for 2017 housing, Cowen says; Trump may have easier path to helping housing, as he doesn’t need to worry about progressive wing opposing helping bigger banks
Citi cautiously optimistic on U.S. construction spending into 2017; cites bi-partisan support for infrastructure development, better public sector funding environment
Buy-rated beneficiaries of longer-extending construction upcycle: URI, ETN, HON, IR, ATKR, ACM, JEC, EXP, SUM

TECH, MEDIA, TELECOM
TWX/T deal: Trump has come out specifically against the deal, saying at a 10/22 speech that this is a “deal we will not approve in my administration because it’s too much concentration of power in the hands of too few”; Clinton has said the deal “raises questions and concerns”
Trump has said he wants to introduce legislation to allow U.S. companies to repatriate overseas cash, taxing it at a one-time rate of 10%.