Many articles have been written about which stocks and sectors will do well or poorly if Trump or Biden wins/loses. Generally speaking, these articles are useful but repetitive. A more interesting idea is to look at the sectors/assets that will do well no matter who wins. With that in mind, here are a few ETFs poised to thrive when either candidate emerges victorious. One surprising area that should prosper in either scenario is clean energy. Biden plans to invest heavily in the area, but even if he does not win, this group of companies have finally become profitable. Couple that with rising pro-green public sentiment, and their long-term outlook is positive. Another area is infrastructure stocks. Both Biden and Trump have big infrastructure spending plans in their agenda ($1.3 tn vs $1 tn), so that appears to be a win-win.
FINSUM: Just as there are winners in either situation, there are also losers. Pharma, for instance, would be under attack in either presidency.
Anyone who has been looking at the bond markets is likely to be shocked at the recent moves in the space. Many “high yield” bonds (it is now necessary to use quotes) are yielding what very high quality investment grade bonds were just months ago. A recent sale saw $1 bn of new issuance for a BB+ company at a 3% yield. The huge move downward in bond yields is the result of the Fed’s unprecedented stimulus action, and in particular, their mandate to backstop corporate bonds.
FINSUM: The Fed’s actions have been so warping that they have called into question the very definition of a high yield bond. If every bond is backed by the Fed, then it makes perfect sense that their yields would equalize. In this way the market’s reaction is entirely predictable.
There has been a lot of negative press about the fate of retail under COVID, and with good reason. Brick and mortar businesses have been devastated and the bankruptcies have been relentless. However, one of the less noticed aspects is that many ecommerce businesses are doing very well. In fact, some retail ETFs, like the Amplify Online Retail ETF (IBUY) have been surging as stocks like Carvana, Overstock.com, and Peloton have seen their shares soar.
FINSUM: Ecommerce is a great bet for right now and for the foreseeable future. In its most basic sense, all COVID did to retail was accelerate the shift to ecommerce into a much faster gear. It was like a five-year jump in four months. There is no reason to expect that to revert any time soon.
A lot of investors are worried about what will happen to stocks if Biden wins, and even more worryingly, if the Democrats sweep the election. The general fear is that without at least a Republican Senate, the Democrats could give in to their more leftist impulses and create policies which would be detrimental to the financial-economic paradigm. However, UBS argues that even if Biden hikes corporate taxes up to his planned 28%, he will offset that with big economic spending to accelerate the recovery, which should more than make up for the loss of profits because of taxes.
FINSUM: This makes pretty good sense. Even if taxes are raised, it is not like the Democrats are planning to balance the budget. Large amounts of deficit spending will likely help keep stocks afloat.
LPL has been a true leader on the recruiting front in 2020. One should expect no less from the largest independent broker-dealer. As one of their new initiatives, they have just launched a program—called the “independent employee” model—to try to attract new advisors who want some of the benefits of being independent, but also want to be a W-2 employee. Such models have been around for a long time, and are most prevalent at Raymond James and Ameriprise, but LPL thinks there is an opportunity to scale it up. The program is designed to appeal to wirehouse advisors who like being W-2s but want to earn higher payouts. Payouts for the program range from 50-70%.
FINSUM: If an IBD is a halfway house between being a wirehouse advisor and being an independent RIA, then this is a one-quarter-way house. It does seem like this might be a smart move—W-2 benefits with higher payouts.