Connect with us

Markets

The Capitalist’s Guide To Thriving In Election Year Markets

Avatar

Published

on

On Monday night, Donald Trump and Hillary Clinton met for a highly anticipated debate. While the debate had its highlights, there are plenty of questions left unanswered. Are we any closer to predicting the next President of the United States of America? How should you trade the markets regardless of either party winning the White House?

Guide To Thriving In Election Year Markets

Every four years, the USA elects a president. Also every four years, investors and pundits try hard to predict how markets will respond to each party taking office. And yes, political parties promote certain values which (in theory) affect the markets. But do the parties’ agendas really influence the markets so much? Here’s what you need to know to trade the markets regardless of which party sits in the oval office.

AVOID POLITICS!

Sounds crazy, right? Especially when you consider that this post is about politics. Except this post isn’t about politics. It’s about trading. And traders find ways to make money regardless of who’s in power.

Everyone has assumptions about what will happen when a certain candidate/party takes over the White House. In 2008, talking heads were clamoring that Obama would put gunmakers out of business, turn healthcare into charity cases, and put clean energy on a pedestal.

But look at the charts.

Smith & Wesson has dominated the market the past five years. The healthcare sector has outpaced the broad market by more than two points a year under Obama. And as for clean energy, which was expected to thrive under this administration? Well those stocks are down 47% under Obama.

Now, I’m not saying don’t vote. DEFINITELY vote. Add your voice to the rest of the country and be heard! But I am saying leave personal beliefs and opinions out of your trading. Political values have an impact on almost everyone’s investment behavior, in ways you may not even notice. One study found mutual and hedge fund managers who contribute to Democrats tend to own fewer “sin stocks” like alcohol, tobacco, or firearms than Republican-donating managers do.

A study of 60,000 investors done from 1991-2002 found people take greater market risks when their party controls Washington. The same study discovered that investors affiliated with the party out of power tend to grow restless and trade securities more frequently. That impatience causes them to underperform compared with when their party is in charge.

When you’re basing a decision on a political opinion, just consider that the S&P 500 has finished up more than 66% of years since 1926, and during that window of time there have been eight Republican and seven Democrat Presidents.
With the election currently happening let us watch this video from Bloomberg and find out what market history tell us about the election.

Investors have made money under failed administrations and successful ones. They’ve made money during war and during peace. And so can you. Just make sure you’re following news and events rather than opinion, and leave politics out of it.

Want to know who’s leading in the election? Check our yesterday’s news about Clinton leading over Trump here!

Follow us on Facebook and Twitter for more news updates!


The statements, views, and opinions of any article, contribution, editorial, or advertisement in this publication are not necessarily those of The Capitalist or its editorial staff, and are not considered an endorsement, sponsorship, or recommendation of any referenced product, service, issuer, or groups of issuers.
This publication provides general information about certain subjects, and should not be construed or taken as advice (legal, financial, investment, tax, or otherwise). Do not construe or take any information in this publication as a solicitation, offer, opinion, or recommendation to buy or sell any securities, bonds, or other financial instruments or to provide any legal, financial, investment, tax, or other advice or service about the suitability or profitability of any financial instruments or investments.
The Capitalist disclaims any liability for the accuracy of or your reliance on any statements, views, opinions, or information in this publication.


 

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Economy

Stocks Close Higher Again, Cap Best 3-Day Run Since 1931

Avatar

Published

on

Stocks Close Higher Again, Cap Best 3-Day Run Since 1931

The Dow Jones Industrial Average climbed more than 1,300 points on Thursday to close the day up 6.4%, continuing its record run and tallying its biggest three-day gain since 1931.

The Dow has climbed more than 20% in the past three days and the S&P 500 is also up more than 20% since Monday’s close as well.

Stocks got a double shot of good news on Thursday, as the Senate passed the $2 trillion economic stimulus bill that will help the country recover from the devastation caused by the coronavirus.

The House of Representatives will try to get the bill passed today, although it will require a voice vote, since most of the representatives have left Washington amid the outbreak. House speaker Nancy Pelosi said the bill will be passed “with strong bipartisan support.”

If the bill passes as expected, Treasury Secretary Steve Mnuchin hopes to get the stimulus checks into the hands of Americans within three weeks.

“We’re determined to get money in people’s pockets immediately,” Mnuchin said.

Also helping push stocks higher were comments from Federal Reserve Chairman Jerome Powell, who hinted that there’s more the Fed can do if called upon to help the economy recover.

Appearing in the Today show, Powell said “We still have policy room in other dimensions to support the economy. We’re trying to create a bridge from a very strong economy to another place of economic strength.”

He added, “When it comes to this lending, we’re not going to run out of ammunition, that doesn’t happen.”

Some investors, however, aren’t convinced that the rally is sustainable.

Ken Berman, a strategist at Gorilla Trades says “Even though equities were squeezed higher into the close, credit markets continue to diverge substantially. You could almost smell the burning shorts on Wall Street [Thursday], but as credit spreads remain wide, one has to wonder how much ‘real’ buying is behind this week moves, besides the bailout-induced short-covering.”

And Gregory Faranello, the head of US rates trading at AmeriVet Securities, adds “This is going to be an economic fallout. We’re seeing in two weeks what we would normally see maybe in a year and a half or two years.”

Much of the doubt surrounding the market’s ability to sustain a rally comes from the abysmal weekly jobless claims report yesterday.

Despite a record number, the market, at least temporarily, shrugged off the historically bad number.

The reason?

It wasn’t as bad as expected.

The Labor Department reported that jobless benefit claims had soared to 3.28 million last week, marking the worst week ever by a very large margin.

The previous record was 695,000 set in October 1982 during the recession.

Yesterday’s report more than quadrupled that number, yet the market still surged higher because it wasn’t as bad as the 4 million claims that some expected, including Citibank.

Even with a record number of jobless claims yesterday and expectations for things to get much worse in the second quarter, the stock market shrugged off the bad news.

There’s a reason for that, according to Randy Frederick, vice president of trading and derivatives at Charles Schwab.

“The markets and the economy don’t run in parallel. The market’s running way ahead of the economy. The markets don’t care about what’s happening today, the market cares about what’s happening six months from now.”

Time will tell if the stock market can continue to be optimistic about the future if the reported numbers keep deteriorating and millions of Americans become unemployed.

Continue Reading

Economy

The Next Generation of Sin Stocks to Ride Out a Bear Market

Avatar

Published

on

The Next Generation of Sin Stocks to Ride Out a Bear Market

While the recent stock market rally has technically pushed the Dow Jones Industrial Average out of a bear market, many investors aren’t convinced it will last.

They expect that once the euphoria surrounding the $2 trillion stimulus plan wears off, the market will resume its slide downward as the economic impact of the coronavirus takes hold in the next few quarters.

Sin stocks, so named because they are things that we should go without but can’t seem to part ways with, are historically a great investment during downturns.

The added stress and uncertainty means an uptick in business for the companies producing these sinful indulgences.

Things like alcohol, cigarettes, weapons and gambling all fall under the umbrella of sin stocks, so companies like Altria (NYSE:MO), Diageo (NYSE:DEO), Sturm Ruger (NYSE:RGR) and MGM Resorts (NYSE:MGM) are all widely considered to be sin stocks.

And while they can make great investments during times of uncertainty, there’s a new breed of sin stocks that could generate even larger returns over the coming months as Americans turn to their (new) favorite vices.

Here’s a short list of “next gen” sin stocks that we expect to do very well.

Marijuana stocks

While this is by no means a “new” vice, it is only in the last few years that it’s been possible to directly invest in companies that produce and sell marijuana. That wasn’t possible during the 2008 financial crisis, so it will be interesting to see how the major players do during their first economic downturn.

Just like smoking, we expect demand to hold up very well, if not increase, during times of turmoil.

Consider the larger companies like Canopy Growth (NYSE:CGC), GW Pharmaceuticals (Nasdaq:GWPH) and Cronos Group (Nasdaq:CRON).

Video Games

Being a “gamer” is a lifestyle now, with livestreaming on YouTube and Twitch and professional Esports leagues formed around the most popular titles like Call of Duty and Overwatch.

Video games are big money now, and the larger production studios will continue to generate massive revenues as the culture grows in the years ahead.

Look at the big studios with strong franchises like Activision Blizzard (Nasdaq:ATVI) which has the Call of Duty and Overwatch franchises and Electronic Arts (Nasdaq:EA) which has the Madden, Battlefield and FIFA franchises.

Social Media Platforms

If you have a child or grandchild under the age of 30, you are probably very aware of the effort it takes to get their attention away from their phones and all the social media apps or platforms that they are using.

Tik-Tok, Twitter, Facebook, and Instagram are all designed to keep users engaged and spending as much time as possible on their platforms. The publicly traded ones are Twitter (NYSE:TWTR) and Facebook, which also owns Instagram (Nasdaq:FB)

While there are no guarantees when it comes to investing, as the coronavirus causes more people to spend time at home, they’ll be spending more time using the products and services of these next generation sin stocks, and that should translate to more revenues and higher profits for the companies.

Continue Reading

Economy

Dow and S&P Post First Back-to-Back Gains Since February

Avatar

Published

on

Dow and S&P Post First Back-to-Back Gains Since February

While it may be a small victory, the Dow Jones Industrial Average and the S&P 500 managed to post their first back-to-back positive days since February.

The Dow closed 2.39% higher, gaining 495 points to close at 21,200. The S&P was up 1.15%, closing 28 points higher at 2,475.

The Dow was helped by a massive 24% rally in Boeing shares and a 9.2% gain for Nike stock.

The Nasdaq slid 0.5% yesterday as the tech-heavy index saw Facebook, Amazon, Apple, Netflix and Alphabet all close in negative territory.

Stock gave back part of their gains right before the market closed when Presidential hopeful Bernie Sanders said he was ready to “put a hold” on the $2 trillion stimulus bill currently working its way through the Senate.

Sanders is looking for tighter restrictions on companies receiving aid from a taxpayer pool of $500 billion.

While the market has used the likely passage of the stimulus bill as a catalyst for the massive rally over the last two days, at least one investor says the stimulus is reassuring Wall Street, not Main Street.

“What the fiscal and monetary stimulus has done is to allow the market to recover,” said Justin Hoogendoorn, head of fixed income strategy at Piper Jaffray in Chicago. “It’s not because the main street community is coming back. It’s the institutional crowd being able to say, ‘the world isn’t falling apart’.”

Others are worried that the euphoria over the stimulus bill is driving the market higher in the same way it originally drove the market down.

Adam Crisafulli, founder of Vital Knowledge, said in a note:

“The stimulus measures will continue acting as equity tailwinds as they seep into corners of the credit market presently locked.”

But he added that the market “is clearly moving much faster than underlying fundamentals and just as sharp declines on prior sessions exaggerated economic conditions, the rebounds will too.”

On Wednesday, former Federal Reserve Chairman Ben Bernanke said that he expects the U.S. economy will have a quick rebound after a “very sharp” recession.

“If there’s not too much damage done to the workforce, to the businesses during the shutdown period, however long that may be, then we could see a fairly quick rebound,” Bernanke said while appearing on CNBC’s Squawk Box.

He added “This is a very different animal from the Great Depression” which he said “came from human problems, monetary and financial shocks. This has some of the same feel, some of the feel of panic, some of the feel of volatility that you’re talking about. It’s much closer to a major snowstorm or a natural disaster than a classic 1930′s-style depression.”

In order for the markets to avoid a “snowstorm” turning into a recession, Peter Oppenheimer, chief global equity strategist at Goldman Sachs, said there are four “components” needed for stabilization:

″(i) A sign that the policy intervention is sufficient to prevent severe second- and third-round economic shocks; (ii) A sign that the infection rate is reaching a peak; (iii) A sign that the economic downturn may be slowing; and (iv) Cheap valuations,” Oppenheimer wrote in a note to clients. “In reality, we believe it will be a combination of these, and in some cases there are already signs these are in place.”

Continue Reading

Trending

Copyright © 2019 The Capitalist. his copyrighted material may not be republished without express permission. The information presented here is for general educational purposes only. MATERIAL CONNECTION DISCLOSURE: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to from this page and may receive commissions from purchases you make on subsequent web sites. You should not rely solely on information contained in this email to evaluate the product or service being endorsed. Always exercise due diligence before purchasing any product or service. This website contains advertisements.