Now that the primary election season is over, it is time to revisit the funds that would do well under the presumptive Republican and Democratic party nominees, and add more funds that could deliver for investors under new political possibilities.
Back in early February, I called the Republican race for Arizona Sen. John McCain and picked
that could do well under his administration.
My choices under a McCain victory in November were the, B+ rated
Fidelity Select Defense and Aerospace Fund
, C- rated
PowerShares Aerospace & Defense Fund
, and the D- rated
SPDR S&P Biotech ETF
McCain vs. Obama: Who's Better for the Economy?
var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1577985383; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);
On the Democratic Party side, Illinois Sen. Barack Obama was able to ride the momentum I cited in my February
to the finish line.
The funds selected to benefit in an Obama presidential win, included the C rated
PowerShares Wilderhill Clean Energy Portfolio
and the E rated
PowerShares Dynamic Building & Construction Fund
On the other hand, I predicted the companies held by the D rated
SPDR Pharmaceuticals ETF
might do poorly under Obama as could the D rated
iShares Dow Jones US Insurance Index Fund
As expected with Obama, the three month returns of 2.79% for pharmaceuticals ETF and negative 0.47% for insurance ETF lagged the 5.77% return from the S&P 500 Index.
If Obama selects Senator Hillary Clinton as his vice-presidential running-mate and adopts her, more industry friendly, healthcare plan, the iShares Dow Jones US Insurance Index Fund would flip back into the potential winner column as would the C rated
Consumer Discretionary Select Sector SPDR Fund
, which also lagged at 3.29% for the same period.
Over the three months ending May 31, the McCain picks gained 3.99% from Fidelity Defense, 7.36% from PowerShares Defense, and 11.66% from the Biotech SPDR. For the same period, the bullish Obama picks grew 8.35% in PowerShares Clean Energy and 8.64% in PowerShares Building & Construction.
The McCain picks averaged 7.67% while Obama's funds averaged 8.50%. So, the completely unscientific analysis currently favors Obama squeaking by McCain in November.
While all the above predictions still hold, there are other political trends to anticipate.
page of McCain's Web site, he promises that he would be in favor of "supplementing the current Social Security system with personal accounts" and lowering "taxes on dividends and capital gains" to "reward saving, investment And risk-taking."
In an environment where hundreds of millions of dollar of new investments flow into brokerage accounts, the firms like
Bank of New York Mellon
Goldman Sachs Group
would be primary beneficiaries collecting fees based on a percentage of their increased assets under management. These are some of the largest holdings of the
Claymore/Clear Global Exchanges, Brokers & Asset Managers Index ETF
. The safest course of action would be to wait until after election and after taking the political temperature of proposed legislation before pulling the trigger on this risky trade.
One stark difference between Obama and the current administration is the approach to foreign policy. Barack Obama's pledge to talk with any foreign leader, as long as the proper "preparations" have been completed, would be a substantial change from the Bush administration.
claims that he "is the only major candidate who supports tough, direct presidential diplomacy." In meetings with these foreign leaders, the topic of economic assistance is likely to be discussed. This may result in the relatively small U.S. foreign aid budget expanding under Obama. The winner here could be the A- rated
Vanguard Emerging Markets ETF
with top holdings of
America Movil SAB
For an explanation of our ratings,
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.