Stocks Plays for the Coming Administration

It's finally over, and the markets still don't like what they see. Obama won the election in a historic landslide last week and also gained more support as the Democrats gained seats in the Senate and the House. This will likely give him any support he needs to pursue just about any policy he sees fit.

Now that the suspense is over, investors can focus on how the new administration will set policies and agendas that will affect primary trends in the market and specific sectors. New agendas will dramatically affect the direction of many sectors in the market, and investors must understand how to take advantage of them.

Investors who have been trying to make sense of the prior market conditions will now have a whole new set of rules to factor in. The key will be to know what sectors of the market will benefit from Obama's plans and which ones you need to avoid like the plague.

It doesn't matter now who you wanted in the White House, what matters is how to align you investment decisions with the new administration's focus for the future, whether you agree with it or not.

So what are some of the trends likely to develop from what we know so far?

On the energy front, Obama's proposed legislation will issue emission permits that will be auctioned to utilities and other businesses with substantial carbon emissions. This is his way of combating global warming.

The advantage of this setup over McCain's proposed plan is that Obama's plan is more of a free-market approach. McCain had planned to give away the permits for free, and that would have required the creation of a huge government bureaucracy to decide which companies would get those permits.

The problem is that Obama's approach will be a huge disadvantage to utilities and other carbon-emitting businesses because of the massive addition of new costs. In fact, Obama stated that new coal-fired power plants would become hopelessly uneconomic under his plan because of the costs of emissions permits these companies would need. Because of the lack of clarity on these energy issues, one can't determine if this will benefit nuclear facilities, but that seems like a high possibility to me. Solar, wind and other alternative energy sources should also do well.

---

At time of publication, Manning had no positions in stocks mentioned, although holdings can change at any time.

Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.