Friday , 30 September 2016


Who’s Better For the Stock Market – A Democrat Or A Republican President? (Part 2)

…Policy changes implemented by whichever party is in power can affect individual industries, stocks, and theTrump economy as a whole. Since 1945, the S&P 500 has averaged 9.7% gains with Democrat presidents compared to 6.7% gains with Republicans. This article examines how GDP growth has fared during different administrations.

This post is an enhanced version (i.e. not a duplicate) of the original from MotifInvesting.com in that it has been edited ([ ]) and abridged (…) by munKNEE.com to provide a faster and easier read. Enjoy!

Two economists at Princeton University, Alan Blinder and Mark Watson, researched GDP growth over the last 16 presidential terms [and found that]:

  • Democratic leadership has outperformed the Republican’s by approximately 1.8% [but]…that
    • changes to fiscal and monetary policy such as tax laws, interest rates, and the size of the federal budget deficit were insignificant to the Democrat’s outperformance [and that,]
    • instead,…[such outperformance could be] attributed to: 
      • lower oil prices,
      • better global economic conditions,
      • improvements in productivity,
      • and a bit of luck.

GDP growth Republican vs Democrat

Source: The Economist

Industries That Could Benefit if a Republican is Elected President

1.  Coal

S&P Capital IQ’s U.S. equity strategy managing direction Sam Stovall recently commented that coal companies may benefit if a Republican comes into office. The industry experienced a near record decline last year of close to 80%. Since Republicans tend to be more lax on air-quality regulations, coal companies might start to climb back up during a Republican administration. Keep a close eye on The Environmental Protect Agency’s activities as well as China and India’s coal usage, which have been slowing.

Dow Jones Coal Index

Source: Google Finance, Dow Jones U.S. Coal Index (INDEXDJX:DJUSCL)…

2. Oil

…A reduced regulatory environment under a Republican administration could increase new pipeline construction and drilling, potentially increasing supply and keeping oil costs low. More pipeline construction and drilling can also mean more business for oil equipment manufacturers. A Republican president could also lift the federal ban on U.S. oil exports….

3. Defense

Republicans are commonly strong supporters of military spending. If a Republican comes into office next year, companies that might benefit from increased defense spending include military contractors, weapons makers, and aerospace equipment suppliers. Increased tensions in the war on terror and a rise in Mexican-U.S. border patrols could also propel defense stocks forward…

What Industries Could Suffer if a Republican is Elected?

1.   Clean Energy

Since Republicans like Trump are supportive of oil and making the U.S. energy independent, clean energy companies could face setbacks if a Republican takes office

2. Made in China

Trump wants to tax Chinese products imported into the U.S. with a massive 45 percent tariff…Such a high tariff…would likely wind up affecting the majority of American consumers with higher prices since so many products are produced in Chinese factories today…

3. Companies that Heavily Rely on Foreign Labor

Trump claims he wants to bring more jobs back to the U.S. by cracking down on American companies that hire foreign workers in place of Americans…Companies that are reliant on foreign laborers could face higher operating costs or potential penalties for overlooking qualified U.S. candidates

Conclusion

Now that you’ve learned how the stock market and the economy could be affected if a Democrat or Republican becomes president, you can make better-educated trading decisions.

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Related Articles From the munKNEE Vault:

1. Who’s Better For the Stock Market – A Democrat Or A Republican President? (Part 1)

In this 2-part series we analyze how the stock market has performed historically during Democratic & Republican administrations and then what sectors could outperform – and underperform with a Democratic president. Part 2 examines possible winners and losers if the Republican party takes over the White House in the upcoming election.

2. Either Trump or Sanders Would Cause Stock Markets To Decline – Here’s Why

The anti-establishment Trump and Sanders might be from different parties, but they both should be of major concern to investors. Here’s why – and it is really scary!