Back to top

Image: Bigstock

Wining & Losing Sector ETFs Post Election Day

Read MoreHide Full Article

Chances of a dividend congress caused a superb rally in Wall Street the day after election.The contest for both the presidency and Senate has emerged tighter than expected. As vote counting started, the figures led market experts to believe that chances of a balanced government are high.

Without any "blue wave," where Democrats rule both chambers of Congress, possibilities became rife that pulling out existing policies and getting the new ones passed would be tougher, even if Democratic candidate Biden wins.

The likelihood of a dividend government means that too many changes on policies are less likely. The policies “will stay more moderate on the economy and taxes,” president of Wells Fargo Investment Institute commented, as quoted on nbcnews.com.

"The belief is that the Senate stays more balanced, and that balance keeps a gridlock — which prevents big changes to health care and the tax code," said Darrell Cronk, president of Wells Fargo Investment Institute, as quoted on nbcnews.com.

As a result, the tech-centric Nasdaq was the main winner, having gained 5.8%, and outdoing the S&P (up 2.20%, which marks its best performance since June) and Dow's (up 1.3%) gains. Per a MarketWatch article, the S&P 500 and the Nasdaq recorded the best post-election day rally in history. The tech-heavy Nasdaq-100 ETF Invesco QQQ Trust (QQQ - Free Report) lost about 6.3% on Nov 4.

The hope of the passage of a fiscal stimulus deal was probably another reason for the rally. Growth investing will also likely stay strong maintaining the ongoing trend. Against this backdrop, below we highlight a few sector ETF winners and losers on Nov 4.

Winners

Technology

Tech companies did extremely well on the bourses in the past two years under the Trump administration and a dividend Congress. So, if there is a divided Congress again, tech companies should continue their wining momentum.

In fact, if Biden wins, tech companies should not fear. Biden’s running mate Senetor Kamala Harris is believed to have cordial relationships with the technological sector during her previous term as district attorney of San Francisco and attorney general in California.

The duo is believed to work on policies that will enhance the “accountability and transparency” of major technological companies instead of “breaking up business units,” per a S&P Global Market Intelligence article. Plus, the coronavirus crisis bolstered the tech space. No wonder, technology soared on Nov 4. Technology Select Sector SPDR Fund (XLK - Free Report) , Global X Cloud Computing ETF Global X Cloud Computing ETF (CLOU - Free Report) and First Trust Dow Jones Internet Index Fund (FDN - Free Report) added 3.9%, 5.7% and 4.9%, respectively, on Nov 4.

Biotech & Healthcare

This space is also a beneficiary of the likelihood of a divided Congress with drugmakers and health insurers having been the biggest gainers. “Even though drug pricing and reimbursement reform have seen support from both Democrats and Republicans, we expect the Senate’s filibuster-proof, 60-vote supermajority requirement to pass major legislation will shield the biopharma industry from the most controversial reforms,” SVB Leerink Geoffrey Porges told clients in a research note, reports Bloomberg, as quoted on Aljazeera.com.

An analyst with Jefferies sees continued deal activity in the space. The Bloomberg report also highlighted that Goldman analyst Asad Haider mentioned the managed care sector is exposed to less risk of a “large progressive public option” or a corporate tax increase, if there is divided Congress.

Cigna (CI), Anthem (ANTM) and UnitedHealth (UNH) gained double digits on Nov 4. iShares U.S. Healthcare Providers ETF (IHF - Free Report) added 4.8% while Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) was up 5.4% on Nov 4.

Losers

Banks

SPDR S&P Bank ETF (KBE - Free Report) dropped 5.4% on Nov 4 on possibilities of more tough negotiations on fiscal spending that could result in a small-sized stimulus. This could cripple credit and lead to weaker economic activities and defaults on loans.

Cannabis

Cannabis stocks started benefiting since Kamala Harris’ favorable comment during a debate with her Republican counterpart Mike Pence.  She said that a Biden administration would decriminalize cannabis at a federal level in the United States. But a divided congress (if there is any) may not make the matter smooth, if Biden wins.

ETFMG Alternative Harvest ETF(MJ) lost 3.1% on Nov 4. However, the fund gained 2.2% after hours probably because “voters have approved ballot measures to legalize recreational marijuana in Arizona and New Jersey, and both recreational and medical use in in South Dakota”, per CNN projections.

Hospitals

Hospital stocks underperformed on Nov 4 “because they have the most to lose if the Supreme Court invalidates the Affordable Care Act” (and a divided Congress wouldn't let Biden to enact an ACA replacement), per Axios' health care business reporter Bob Herman. HCA Healthcare Inc. (HCA - Free Report) , the largest non-governmental operator of acute care hospitals in the United States, lost about 3.2% on Nov 4.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>