By now the world has decided that Clinton’s win will be a heyday for stocks and Trump’s win will mean doomsday for risky asset classes. As a result, whenever Clinton’s popularity grew, stocks soared and vice versa. Citi projects an immediate crash of up to 5% for the S&P 500 if Trump wins while JP Morgan sees the S&P 500 touching about 2,150 on Clinton’s victory (read: Clinton Gets Past FBI Investigation: ETFs in Focus).
But there is another side to the common belief. There are chances of equity sectors outperforming too.
As per the source, the famous Warren Buffett quote “be greedy when others are fearful” may be the trick to win on Trump’s victory. In other words, the dip strategy (if Trump wins) may benefit investors over the long term. On this ground, ETFs like iShares Russell 1000 Value ETF (IWD - Free Report) and quality ETFs like iShares Edge MSCI USA Quality Factor (QUAL - Free Report) might favor investors’ portfolio over the long term.
Also, there are a few equity sectors that could stand to gain in Trump presidency, if we at all experience that (read: Clinton or Trump; These Stocks & ETFs Will Win).
Below we highlight these:
Trump is perceived as an advocate of easy money policies and low interest rates. This along with a subdued greenback may be great for large-cap U.S. stock ETFs like SPDR S&P 500 ETF (SPY - Free Report) .
If Trump wins, Health Care will not have to bear controversies regarding price gouging issues. So, the immediate impact should be positive on healthcare ETFs like Health Care Select Sector SPDR ETF (XLV - Free Report) .
Clinton seeks to restrain extreme risk-taking tendencies among big financial institutions and curb the risks lying underneath the shadow banking system. She is in favor of levying a tax only on high-frequency traders who terminate a lot of orders. On the other hand, historically, financial stocks perform better with republicans in the White House thanks to their tolerant policies. So, financials ETFs like Financial Select Sector SPDR ETF (XLF - Free Report) . However, if bond yields continue to drop, the scenario might not be that great for financial stocks.
The Trump tax plan would lower the top income tax bracket from 39.6% to 33%, eradicate alternative minimum tax, slash corporate income tax by more than half and remove estate tax, as per the source. Lower taxes could propel consumer spending on the domestic level, benefitting consumer discretionary ETFs like Consumer Discret Sel Sect SPDR ETF (XLY - Free Report) .
Donald Trump is also in favor of beefing up public spending by hundreds of billions of dollars, in spite of the fact that republicans intend to check government spending. In fact, his spending plans are deemed much higher than Clinton. Utilities ETFs like First Trust Utilities AlphaDEX Fund (FXU - Free Report) are likely to benefit from this trend.
Taking a completely difference stance from president Obama, Trump is ready to push for more fossil fuel generation, be it from crude oil, natural gas or coal. This in turn may fuel VanEck Vectors Coal ETF (KOL - Free Report) (read: Top Sectors of Q3 and Their Best ETFs).
He appears aggressive in foreign policy. He stressed the need for additional investments in missile defense in Europe. So, defense and aerospace ETFs includingiShares US Aerospace & Defense (ITA - Free Report) should soar.
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