Can the markets determine debate winner?
If Hillary Clinton wins
If it’s perceived that Hillary won the debate, the overall market will be higher. Specifically, it will be higher in the areas of hospitals, HMOs, and energy.
If Donald Trump wins
If Donald Trump is the debate winner, we will probably see the overall market trade back. The sectors that will trade up will be defense and biotech. This is really just a “rearranging of the deck chairs” as investors move from one area of the market to another. This also causes a lot of market volatility.
What’s on the line in this debate?
Now that the debate is here, the market will really start to pay attention to what each candidate says. Also, there has been research to show that 50% of voters are waiting until after the debate to decide who they will vote for.
What are the political scenarios?
Historical data shows that when there is a Republican president and a Republican Congress, the market performs best with an annualized rate of return at 15.1%. A more likely scenario is a Democratic Senate, a Republican House, and a Democratic president. Historically, that scenario has had a 13.6% annual rate of return. For the last few years we have had a Democratic president and Republican Congress. That has given us a 13.3% annual rate of return. This is historical data with no guarantees but it is very interesting to look at and analyze.
The key issue to listen for in the debate
If one of the candidates tonight brings up the topic of the deficit, you need to pay attention. Whoever wins this election will go into office with the worst deficit since Harry Truman went out of office at the end of World War II. Whether the new president wants to cut taxes or spend money, or both, they are not going to have a lot of room. This has a lot to do with entitlement and the debt itself being much larger. The only thing saving us is that the interest rate on the debt is low but most of this debt matures in the next 3 years. Even in a growing economy, this is a hard task.
So as you watch the debate tonight, we hope this information helps you evaluate what is discussed. There will be many topics discussed, but there will be some more important than others. We will keep you updated on who the markets perceived as the debate winner.
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Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.