Investors are surely anxious today as the first one-on-one debate between President Trump and his Democratic opponent Joe Biden is underway. The race for the White House has certainly heated up, with the Republicans and Democrats getting into a tussle over nominating Supreme Court Justice Ruth Bader Ginsburg’s suitable replacement. Trump and Biden are expected to take up the issue as it certainly delays the process to implement the much-needed additional stimulus measures to pep up the economy that has been shaken by the coronavirus pandemic.
Presently, Biden holds an edge over Trump. Per the
national average of polls by Real Clear Politics
, Biden is ahead of Trump by 6.9 percentage points, 49.8 to 42.9. Biden is in favor of infrastructure spending to boost economic growth. But he does emphasize on more regulations on certain sectors like health care, banks and energy as well as increased taxes for individuals and business houses. He has also been soft when it comes to using tariffs against China.
Meanwhile, Trump has been more aggressive when it comes to imposing tariffs on China goods, and in all likelihood will push for more infrastructure spending. Lest we forget, his corporate tax cut policies have already been appreciated by businesses. All in all, it’s going to be tight presidential election contest, and we expect a heated debate today related to the mail-in-ballots, which according to Trump can be manipulated.
So, what does this mean for the markets? Nothing encouraging! In fact, the gains have been pretty much muted post-debate. According to
LPL Financial’s chief strategist Ryan Detrick
, since 1960, after the first presidential debate, the broader S&P 500 on average has declined in the next day, 5-day, 10-day and one-month period by 0.3%, 0.9%, 1.8% and 2%, respectively.
Dow Jones Market Data
also showed that the stock market tends to drop 0.14% on average after the first presidential debate. What’s more, the stock market declined 1.51% from the first face-off to the second, 2.5% from the first to the final one, and 0.35% from the first debate to the Election Day.
Yes, election-led volatility isn’t going away any soon either. Closely contested presidential election does result in wild swings in the equity market, and the Cboe Volatility Index’s (VIX) future expiring on Nov 18 was
trading at around 32.90
. Notably, it covers the presidential election period and any reading above 20 signifies volatility. The VIX was at 26.19 on Sep 28.
The Winning Strategy
One thing is for sure, the stock market will continue to be volatile heading toward the Election Day, and thus investing in stocks unfazed by market gyrations seems wise. So, how to pick such stocks? Here, we consider low-beta stocks that are mostly less volatile than the markets they trade in. Low beta, in fact, ranges from 0 to 1.
Then, we go for defensive players or companies whose business is not solely dependent on activities taking place in the broader market. Demand for products of defensive players will always be constant regardless of market volatility. Prominent among them are utilities and consumer staples. After all, electricity, gas, water, food and beverages are necessary items.
4 Solid Choices
MYR Group, Inc
MYRG Quick Quote MYRG - Free Report
) serves the electrical infrastructure market throughout the United States and completes electrical installations of any type and size. The company currently has a beta of 0.84. The Zacks Consensus Estimate for its current-year earnings has moved up 14.7% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 24.3% and 12.5%, respectively.
NRG Energy, Inc.
NRG Quick Quote NRG - Free Report
) is engaged in the production and delivery of energy products and services to industrial as well as commercial consumers in major competitive power markets in the United States. The company currently has a beta of 0.99. The Zacks Consensus Estimate for its next-year earnings has risen 12.8% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 37.6% and 29%, respectively.
The Hain Celestial Group, Inc
HAIN Quick Quote HAIN - Free Report
) manufactures and sells organic and natural products in United States. The company currently has a beta of 0.75. The Zacks Consensus Estimate for its current-year earnings has advanced 12.9% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 35.7% and 15.8%, respectively.
TreeHouse Foods, Inc.
THS Quick Quote THS - Free Report
) operates as a consumer-packaged food and beverage manufacturer in the United States. The company currently has a beta of 0.65. The Zacks Consensus Estimate for its current-year earnings has moved 3.1% north over the past 60 days. The company’s expected earnings growth rate for the current and next year is 11.7% and 7.1%, respectively.
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