3 Investment Strategies for the 2020 Presidential Election

3 Investment Strategies for the 2020 Presidential Election

By: Stacey Nickens

This past weekend, I curled up with a warm drink and enjoyed completing an autumn-themed puzzle. Of course, when I got to the end, I was missing just one piece. That’s just my luck! I was frustrated at first; however, I realized I was missing the bigger picture by focusing on one tiny problem. Instead, I shifted my attention to the overall beauty and coziness of the completed puzzle. I also prioritized the calmness I felt after working quietly on the puzzle for a few hours. When I was able to look away from the thorn, I could see the beauty of the rose.

I believe this approach could be useful as we approach the upcoming election. You could keep your eyes trained on all the ways things could go wrong if A happens or if B happens. However, I challenge you to think about the different election outcomes and the opportunities that could arise out of each outcome. By keeping our minds trained on these opportunities, we can find hope even in tumultuous times and ensure that our investment decisions are made calmly and carefully.

Look at the utilities sector for the potential for less tax-related volatility. If President Trump were to win reelection, it’s likely that tax policy will remain relatively unchanged, with the potential for continued or increased tax cuts. Comparatively, former Vice President Biden would likely raise corporate tax rates from 21% to 28%. A corporate tax hike could impact some stock valuations depending on the company’s earning composition. However, stocks in the utilities sector may be more protected from valuation impacts due to corporate tax hikes. Customer rates are usually set based on utilities’ aftertax earnings. As a result, utilities companies could compensate for higher taxes with a rate increase. Within the utilities sector, I have been looking at Brookfield Renewable Partners and Consolidated Edison.

Infrastructure-related investments could be a safe bet under either administration. Both parties will likely maintain or increase infrastructure spending, and as a result, companies that support such projects could see a bump. Infrastructure-related companies include those that provide raw materials and aggregates, those that supply heavy machinery, and those that provide engineering and construction services. If former Vice President Biden secures the White House, you might also look into companies that support renewable energy projects, given that the candidate has pledged to support green energy policies. Within the raw materials sector, I have been watching Summit Materials.

Consider companies with shorter supply chains. Regardless of who’s elected come November 3, the United States will likely continue to see trade tensions with China. These tensions have been especially exacerbated by COVID-19, which underscored the weaknesses in international supply chains. Some companies have already looked into moving their supply chains back to or closer to the United States as a result. This trend could continue under either candidate. That being said, Morningstar analysts suggest that Rockwell Automation, Fastenal, and W.W. Grainger could profit off of shorter supply chains. However, the analysts also warn that these stocks are presently overvalued.

Sources: Morningstar
Disclosures: Past performance is not a guarantee or a reliable indicator of future performance. All securities carry a unique set of risks subject to a variety of factors. There is no guarantee that these investment strategies will work under all market conditions or that they are are suitable for all investors. This material has been distributed solely for informational purposes and should not be considered as individual investment advice or recommendation. Individuals should consult their investment professional prior to making an investment decision.
By Categories: BlogPublished On: October 26th, 2020