Daily Management Review

Finally U.S. Investors Start Worrying About the Presidential Contest


09/24/2016




Finally U.S. Investors Start Worrying About the Presidential Contest
With the first debate between candidates Hillary Clinton and Donald Trump starting on Monday, who becomes the next U.S. president will be a primary focus for Wall Street next week and beyond.
 
As polls show a tightening race for the White House, there may soon be a change in the way markets react despite the fact that the White House race has so far had little discernible effect on the market. Some investors see a toss-up contest creating volatility in certain sectors, including health insurers, drugmakers and industrials with just over six weeks until Election Day and Clinton's once-comfortable lead in opinion polls having evaporated.
 
In addition to Trump’s sometimes contradictory proposals at odds with mainstream Republicans, such as his protectionist stance on international trade, many on Wall Street worry about the uncertainty of what Trump would do as president.
 
After the Federal Reserve on Wednesday left interest rates unchanged, some investors believe U.S. equities are likely to edge higher next week. The S&P 500 is about 1 percent short of its record high set in August and it has gained 6 percent in 2016.
 
"We're probably looking at a modestly positive week pushing the high end of the S&P 500, unless something comes out of the debate that spells real success for Trump. The market seems to favoring the 'known' of Hilary rather than the 'unknown' of Trump," said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York.
 
A "neutral" impact on financial markets would be left with a Clinton presidency with a divided U.S. Congress, Wells Fargo said in a recent report. On the other hand Wells Fargo said that there would be a "slightly negative" market impact with a Trump victory and a divided Congress.
 
Some investors said that so far, the election has been too far away and too close to call to trade specific stocks.
 
Still, due to Clinton’s severe criticisms that she has made about high drug prices, many view a Clinton presidency as broadly negative for pharmaceutical companies. As part of an attempt to counter criticism that she was too closely tied to the insurance industry, Clinton frequently has said during the primary that she would fight pharmaceutical companies.
 
David Schiegoleit, managing director at the Private Client Reserve at U.S. Bank said that Industrial companies and other major exporters might suffer should Trump become president because of Trump's disapproval of free trade agreements.
 
Convergex market strategist Nicholas Colas wrote in a note on Friday that health insurance stocks could swing if the debate produces a clear winner as with Trump vowing to repeal the Affordable Care Act and Clinton promising to build on it.
 
Since President Barack Obama signed his healthcare overhaul in 2010, health insurers have been big winners. Cigna has risen 257 percent, UnitedHealth Group has jumped 325 percent and  Aetna  is 234 percent higher. During the same time, the S&P 500 rose 85 percent.
 
(Source:www,reuters.com) 






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