Finally, the day of the 2016 U.S. presidential election is here. Almost everyone is waiting for the final outcome with bated breath to decipher the future of the U.S. economy and the movement of the stock market.
After the FBI gave the clean signal of no criminal charges against Hillary Clinton on Monday, the stock market bounced back strongly snapping the nine-day losing streak – the longest in more than 35 years. In fact, the major indices logged in the best one-day gain of over 2% since March a day before the Election Day.
Though the race tightened over the last few weeks, the market is still betting on Clinton – the "status quo" candidate. On the other hand, Trump win could roil the financial stock markets with his proposed trade policy that could spark trade wars.
The uncertainty over the outcome has kept investors’ wary. This is especially true as the Dow Jones has fallen seven times while the S&P 500 has dropped six times since the 1952 election. However, Dow Jones and S&P 500 climbed the most on the Election Day in 2008, rising 3.28% and 4.08% respectively. In 2012, Dow Jones gained 1.07% and the S&P 500 added 0.79%. Moreover, the stock market has performed better during Democratic presidencies (read: 4 ETFs to Hedge Your Portfolio Before Presidential Election).
Given this, investors should keep a close eye on the ETFs that are big movers today and follow the election:
SPDR S&P 500 (SPY - Free Report)
The majority of the Wall Street analysts believe that the S&P 500 will see a big sell-off if Trump gets elected and witness a moderate relief rally if Clinton wins. As per Barclays, the S&P 500 index may nosedive as much as 13% if Trump wins while it can gain as much as 3% if Clinton moves to the White House. A great way to get a diversified exposure to all the S&P 500 companies is with SPY. The ETF is down 0.8% over the past 10 days and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: ETFs to Watch if Trump Makes it to White House).
iPath S&P 500 VIX Short-Term Futures ETN (VXX - Free Report)
The CBOE Volatility Index (VIX) is often known as the ‘fear index’ as it tends to outperform when investors are skittish about the market’s current direction. The gauge rose for nine consecutive days through Friday but fell on Monday. With this, VXX, the ETN tracking this benchmark, rose about 9% over the past 10 days. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months VIX futures contracts.
SPDR Gold Trust ETF (GLD - Free Report)
Gold will likely be the undisputed winner if Trump gains control of the White House as his policies could result in complete chaos in the economy and fiscal policy. On the other hand, Clinton’s victory could lower the appeal for the yellow metal with her more protectionist stance. As such, gold broke the $1300 per ounce last week on indications that Republican Donald Trump was gaining momentum but the price pulled back on Monday on renewed faith in Clinton. GLD, which tracks this bullion, added 1.3% over the past 10 days. The fund tracks the price of gold bullion measured in U.S. dollars and has a Zacks ETF Rank of 3 with a Medium risk outlook.
iShares MSCI Mexico Capped ETF (EWW - Free Report)
Trump policies could prove to be a nightmare for the Mexican economy with less employment, less income, lower exports, and thus a weakening currency. He intends to renegotiate or terminate the North American Free Trade Agreement – the free trade deal between Canada, Mexico and America – and has pledged to crack down on immigration. As a result, Trump’s victory could hurt Mexico ETF. EWW offers diversified exposure to the Mexican stocks. It lost 0.5% over the past 10 days and has a Zacks ETF Rank of 3 with a Medium risk outlook (read: Mexico ETFs to Hinge on U.S. Presidential Election).
iShares 20+ Year Treasury Bond ETF (TLT - Free Report)
Americans will pile up the country’s debt with a flight-to-safety if Trump makes it to the White House, pushing the yields lower. In particular, the U.S. government bonds tracking the long end of the yield curve will be in vogue with the ultra-popular long-term Treasury ETF – TLT. The fund focuses on the top credit rating bonds with average maturity of 26.46 years and effective duration of 17.78 years. It shed 1.5% over the past 10 days and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook.
Health Care Select Sector SPDR Fund (XLV - Free Report)
The healthcare sector has garnered a lot of attention with varied policies and reforms on Obabamcare and drug pricing. While Clinton’s proposal of lowering the cost of prescription drugs and increased regulatory scrutiny are weighing heavily on the stocks, Trump’s repealing of Obamacare has also hit the sector. The ultra-popular healthcare ETF – XLV – was down about 2% over the past 10 days and has a Zacks ETF Rank of 1 or ‘Strong Buy’ with a Medium risk outlook (read: Healthcare ETFs in the Spotlight as Election Approaches).
VanEck Vectors Coal ETF (KOL - Free Report)
The black diamond is an interesting area to watch this election with diverse proposals from both parties. This is especially true as Trump promised to revive the downtrodden coal industry and scrap regulations if elected while Clinton vowed to combat climate change by phasing out reliance on fossil fuel energies and expanding renewable energy production. So, a Trump win could benefit the ETF targeting the global coal industry. KOL gained 4.4% over the past 10 days and has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook (read: Coal ETF Hits New 52-Week High).
The Restaurant ETF
Clinton plans to raise minimum wages from $7.25 to roughly $15 per hour and thus her presidency could hit profit margins of industries like retailers, restaurants and hotels that employ low-wage workers in huge numbers. In particular, BITE, which offers exposure to 41 of the world’s most recognizable and iconic brands, will have a negative impact from the implementation of a minimum wage as the hike will eventually lead to increased menu prices hurting sales at restaurants. The ETF lost 1.6% over the past 10 days and has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating with a High risk outlook (read: Prepare for a Clinton Presidency with These Stocks & ETFs).
First Trust ISE-Revere Natural Gas Index Fund (FCG - Free Report)
Trump is looking to reduce regulations related to the Environmental Protection Agency and ease rules for drilling in the Arctic Range or for offshore as well as for new pipeline construction. The reduced regulatory environment would be highly beneficial for oil and natural gas companies and ETFs like FCG. The fund focuses on stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It shed 5.3% over the past 10 days and has a Zacks ETF Rank of 3 with a High risk outlook.
Financial Select Sector SPDR Fund (XLF - Free Report)
The financial sector will likely hurt under the Clinton presidency as she seeks to impose more stringent regulations than Trump. Notably, Clinton seeks to restrain extreme risk-taking tendencies among big financial institutions and curb risks lying underneath the shadow banking system. A broad play on the financial sector - XLF – added 1.3% over the past 10 days and has a Zacks ETF Rank of 3 with a Medium risk outlook.
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