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WILL THE ELECTION AFFECT YOUR PORTFOLIO?

By Scott Chan • October 16, 2024 • Stocks to Watch

Printable PDF

Editor’s Note: During an election year, it’s natural for investors to wonder how
the next president, whoever wins in November, will affect the stock market.

Each party’s platform is well known. For example, Republicans tend to favor
lower taxes while Democrats push for spending to support renewable energies.
Therefore, it should theoretically be easy to form expectations about how each
party will affect the market.

In reality, the actual impact can be counter-intuitive. Below, I explore the
sometimes surprising ramifications of politics on your portfolio.

--------------------------------------------------------------------------------

THE ENERGY SECTOR THRIVES UNDER BIDEN

Democrats under Joe Biden have pushed hard for decarbonization, mandating carbon
emission reductions while supporting clean-energy initiatives. Thus, one might
think oil stocks are in trouble. Nope.

Quite to the contrary, fossil fuel stocks have done really well under his
administration. The following chart shows the price performance of the SPDR S&P
Oil & Gas Exploration & Production ETF (XOP), a benchmark exchange-traded fund
of oil and gas upstream companies, from Election Day 2020 to 10/11/24. As you
can see, the price of XOP has more than tripled in price over that period:



Because Biden’s policies aim to limit fossil fuel production, they tend to
restrain supply growth and result in higher oil prices, which is good for oil
companies’ top and bottom lines. And of course, the Russian invasion of Ukraine
also caused a big jump in energy prices.

On the other hand, even though Donald Trump and Republicans are friendly to
traditional fossil fuel, under the Trump Administration oil stocks performed
terribly. Greater supply and lower oil prices, while good for consumers, aren’t
so great for the corporate bottom line.

To be clear, for the long-term viability of the fossil fuel industry, Republican
policy would be more favorable. However, the point is that policy that increases
supply can push prices down, which in turn would not help oil companies’ stocks.

TECH: IMPERVIOUS TO POLITICS

Moreover, one would think that Donald Trump in office would be unfavorable for
information technology. Wrong again.

The former president has repeatedly wailed against Big Tech, in and out of
office. In particular, he excoriates social media companies for their supposedly
anti-conservative bias, a claim made by many Republicans (but with no evidence).

Yet the tech sector has done great, even during Trump’s previous tenure in the
White House. Tech companies have benefited from the explosion of digitalization
and interconnectivity, which shows no signs of slowing down anytime soon.

Investors seeking earnings and free cash flow growth have flocked to tech,
especially the mega-caps that now occupy top spots in market indices. This trend
seems impervious to politics.

POLICY IMPACT ON YOUR PORTFOLIO: MINIMAL OVER TIME

These examples don’t mean that government policies have no impact on the market.
For example, a corporate tax decrease would be good for profits while a tax hike
would be bad. And therefore, tax-related action should have some impact on the
market, at least in the short term as investors react to the news.

However, while regulatory policy is important, ultimately for stocks how a
company’s business is doing is more important in determining the trajectory of
its stock.

It’s important not to get overly caught up in who’s going to win the election
because ultimately the result won’t affect your portfolio as much as you may
think, at least over the long run.

In the short run, however, the stock market could make sharp moves one way or
another based on expected policy changes. If we look back later on, such moves
may be nothing but noise in the big scheme of things, but at the time it’s still
possible to take advantage of quick but large moves in the market.

One way to try to increase returns without significantly affecting your core
portfolio is by using options. Options offer flexibility and leverage that
normal stock investing can’t and allow you to amplify profits in a quick amount
of time. They allow you to speculate and/or hedge, depending on what strategy
you use. Used correctly, options can be very effective and profitable
moneymakers.

WATCH THIS VIDEO: Jim Fink Reveals the Keys to Unlocking Wealth

When it comes to using options correctly, my colleague Jim Fink is a renowned
expert.

As chief investment strategist of Velocity Trader, Jim Fink has devised a
methodology that generates market-thumping gains…in up or down markets and
regardless of political uncertainty.



One of the most important presidential elections in our lifetime is just around
the corner. Many investors are nervous and hunkering down. But not Jim.

In a new presentation, Jim Fink explains the simple strategy he uses to rake in
gains of 104%, 164%, and 203%…in as little as 72 hours. Even in this topsy-turvy
election year.

Can Jim’s election-year trades really be this profitable? Click here to find
out.

 


ABOUT THE AUTHOR

Scott Chan
Bio | Archive

Scott Chan moved from China to the U.S. with family at the age of ten. He passed
the rigorous entrance exam and attended the merit-based Stuyvesant High School,
widely held to be best public school in New York City. He earned undergraduate
degrees from New York University followed by an MBA degree from the Zicklin
School of Business at Baruch College.

Shortly thereafter Scott partnered with Dr. Stephen Leeb on numerous financial
publications. Today, he serves as the lead analyst for Real World Investing and
The Complete Investor.

Mr. Chan is an avid baseball fan and enjoys outdoor activities in his spare
time. A multicultural person, he reads Chinese and speaks fluent Mandarin and
Cantonese Chinese.

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