There are certain areas of the economy that tend to benefit, depending upon which political party is in the White House. As the 2012 US Presidential Election approaches, there are some foreseeable moves to make for how to invest with Romney or how to invest with Obama as president. Let's take a closer look at the best investments for Democrat vs Republican:
Market Sectors, Mutual Funds & ETFs: Romney vs Obama
- Health Sector (Obama): Romney has made it clear that he would begin on day one of his presidency to repeal the health care bill, now known as "Obamacare." An Obama win in November would mean hospitals could minimize debt burdens. Also, Managed care and pharmaceuticals are especially historic standouts here for Democrats. Investment options include Vanguard Health Care Inv (VGHCX) or Vanguard Health Care ETF (VHT). Another fund that expands beyond hospitals and pharmaceuticals and includes biotechnology is T. Rowe Price Health Sciences (PRHSX).
Financial Sector (Romney): Republicans generally favor looser regulation of the financial industry than Democrats. For example, in the first 2012 presidential debate, Mitt Romney said he would "repeal and replace" the tight regulations on big banks set forth in the 2010 Dodd-Frank bill. Fund standouts include Davis Financial A Load Waived (RPFGX.LW) and Financial Select Sector SPDR (XLF).
Defense Sector (Romey): He is in favor of a bigger, stronger military. Obama is in favor of a strategic, leaner military. Fund choices here include Fidelity Select Defense & Aerospace (FASDX) and iShares Dow Jones Defense & Aerospace ETF (ITA).
Alternative Energy (Obama): Democrats have been in favor of alternative sources of energy--specifically "renewable" energy, such as wind and solar--in recent years. For example, Obama supports the extension of the wind protection credit (PTC) and Romney appears to be leaning away from this tax credit. Fund choices include Calvert Global Alternative Energy I (CAEIX) and First Trust Global Wind Energy (FAN).
Dividend-Paying Stocks (Romney): If Obama is elected, look for an increase in the dividend tax rate, which would place downward pressure on stocks and mutual funds that pay dividends. However, Romney is against any increase in investment-related taxes.
Market Timing Caution: Short-term Outlook
Beware of the risk of market timing. Keep in mind that these narrowly-focused sectors can be volatile and many only receive short-term increases in price. Markets will resume focus on the big picture soon after the election and prices could then have downward pressure. For example, once the uncertainty over the next president is removed, investors will begin looking at potential weakness, such as a slow economy, unrest in the middle east, and an impending "fiscal cliff" crisis by years' end. In addition, investors know that any president is unlikely to be successful in bringing about significant changes because Congress will remain divided.
Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.