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Possible Winners And Losers If A Republican Becomes President

24 March 2016 in Investing Insights

Key Takeaways

  • Both stock market performance of the S&P 500 and U.S. GDP has been shown in studies to perform worse under Republican presidents.
  • Industries that may benefit under a Republican administration include coal, oil, and defense.
  • Clean energy companies, products made in China, and companies relying heavily on foreign labor could face setbacks.

We recently analyzed possible stock market impacts of a Democrat becoming president. Policy changes implemented by whichever party is in power can affect individual industries, stocks, and the economy as a whole. Since 1945, the S&P 500 has averaged 9.7 percent gains with Democrat presidents compared to 6.7 percent gains with Republicans.1

Let’s examine how GDP growth has fared during different administrations. Two economists at Princeton University, Alan Blinder and Mark Watson, researched GDP growth over the last 16 presidential terms.

The results show Democratic leadership has outperformed the Republican’s by approximately 1.8 percent. What’s interesting to note is that Blinder and Watson concluded in their study 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. Instead, they attribute lower oil prices, better global economic conditions, improvements in productivity, and a bit of luck.2

GDP growth Republican vs Democrat

Source: The Economist

Industries That Could Benefit if a Republican is Elected President

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 percent.3 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)

Related Stocks: Console Energy (NYSE:CNX), Arch Coal (ACI), Peabody Energy Corp (BUTE), Cloud Peak Energy (NYSE:CLD), MLP Westmoreland Resource Partners (NYSE:WMLP), Westmoreland Coal Co. (NASDAQ:WLB), Alliance Resource Partners (NASDAQ:ARLP).

Related Motifs: Fossil Free, Energy Takeout Targets

Oil. If Donald Trump is elected President, it’s quite possible that oil and natural gas companies could benefit at the margin. Trump is serious about oil’s significance to the U.S. economy and wants the country to be energy independent.4 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.

Related Stocks: Southwestern Energy Co. (NYSE:SWN), Pioneer Natural Resources Co. (NYSE:PXD), Occidental Petroleum Corp. (NYSE:OXY), Apache Corp. (NYSE:APA), Chevron Corp. (NYSE:CVX), Exxon Mobil Corp. (NYSE:XOM).

Related Motifs: Black Gold, Shale Oil, Frack Attack.

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.

Related Stocks: Honeywell International Inc. (NYSE:HON), Raytheon Co. (NYSE:RTN), Elbit Systems Ltd (NASDAQ:ESLT), Huntington Ingalls Ind Inc. (NYSE:HII), Lockheed Martin Corp. (NYSE:LMT), Northrop Grumman Corp. (NYSE:NOC).

Related Motifs: Modern Warfare; Guns, Guards and Gates

What Industries Could Suffer if a Republican is Elected?

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. Both Trump and Rubio support the Keystone XL Pipeline, fracking, and reducing EPA regulations.5

Related Stocks: SunEdison (NYSE:SUNE), First Solar (NASDAQ:FSLR), JA Solar Holdings (NASDAQ:JASO), Ormat Technologies Inc. (NYSE:ORA), Badger Meter Inc. (NYSE:BMI), Tesla Motors Inc. (NASDAQ:TSLA), ESCO Technologies Inc. (NYSE:ESE).

Related Motifs: Cleantech Everywhere, Battery Charged, Fossil Free.

Made in China. Trump wants to tax Chinese products imported into the U.S. with a massive 45 percent tariff. Some argue that the U.S. economy could suffer greater losses than the amount gained in revenue and in protected industries.

Such a high tariff on Chinese products would likely wind up affecting the majority of American consumers with higher prices since so many products are produced in Chinese factories today. Also of note, China will likely overtake Canada this year as the largest single U.S. trading partner.6

Related Stocks: Apple (NASDAQ:AAPL), Nike (NYSE:NKE), Hewlett Packard (NYSE:HPQ), Microsoft (NASDAQ:MSFT), Intel Corporation (NASDAQ:INTC), Coach Inc. (NYSE:COH).

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. In an interview with Breitbart, Trump said, “If I am President, I will not issue any H-1B visas to companies that replace American workers and my Department of Justice will pursue action against them.”7

Companies that are reliant on foreign laborers could face higher operating costs or potential penalties for overlooking qualified U.S. candidates. However, Trump has recently come under fire – labeled a hypocrite – for rejecting over 94 percent of American job applicants and hiring foreign workers at his exclusive Palm Beach club Mar-a-Lago.8

Related Stocks: Disney (NYSE:DIS), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Ernst & Young (EY), IBM (NYSE:IBM), Alphabet (NASDAQ:GOOG), Intel (NASDAQ:INTC), and other major technology companies.

Immigration Reform. Republicans are generally known for their strict views on immigration. Trump has raised eyebrows with his determination to build a wall between the U.S. and Mexico. Meanwhile, Rubio and Cruz want E-Verify to be required nationally and to allow biometric entry-and-exit visa tracking.9

Ready to Make a Move?

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.

Open an account today and check out unique ideas such as our Democratic Donors or Republican Donors motifs that can’t be found anywhere else.

Investments in commodity-related products, such as precious metals, agricultural products, and oil may be subject to greater volatility and liquidity risks than investments in traditional securities. Commodity-related products can be significantly impacted by underlying commodity prices, world events, government regulations, and economic conditions, which can dramatically affect the value of an investment.

  1. Long, Heather, “Democrats Vs. Republicans: Who’s Better For Stocks?” CNN Money, October 28, 2015.
  2. The Economist, “Presidents And Growth: Timing Is Everything,” The Economist, August 9, 2014.
  3. Borzykowski, Bryan, “Why Presidential Election Years Are Bad For Stocks,” The Fiscal Times, January 13, 2016.
  4. Kira, “Stocks To Buy If Republicans Win The White House,” U.S. News, August 25, 2015.
  5. McCown, Brigham A, “Energy And Election 2016: Where The Presidential Candidate Stand,” Forbes, October 29, 2015.
  6. Haberman, Maggie, “Donald Trump Says He Favors Big Tariffs On Chinese Exports,” The New York Times, January 7, 2016.
  7. Cooke, Charles C. W., “Donald Trump Turned Down 94.4 Percent Of American Job Applicants, Applied For Hundreds of ‘H’ Visas Instead,” national Review, February 25, 2016.
  8. Ibid.
  9. Barone, Michael, “Arizona, Not Trump, Shows Republicans The Way On Immigration,” National Review, March 1, 2016.
  1. Brian
    24 Mar at 12:54 pm

    I really hope Trump is not elected president for so many reasons including what would happen to the stock market.

  2. Alex
    26 Mar at 10:31 am

    I never really thought about how the markets can react during election years. Now it makes so much sense. I think Clinton is going to win but time will tell.

  3. Robert Canine
    3 Apr at 10:37 pm

    I can’t believe that you spent so much time analyzing something that doesn’t make sense in the first place. It’s not the president who’s in charge of spending — it’s Congress. Duh.

    Do the same analysis comparing economies under Democrat-controlled vs. Republican-controlled (vs. split) Congresses and you will see a difference that is stark and unmistakable. The reason that spending actually decreased and the economy bounced back under Clinton is because there was a Republican-controlled Congress almost the whole time.

    Whenever Democrats control Congress, spending skyrockets and the economy suffers. Seriously. Look into it.