Rathbun: Now what?Written by Gary Rathbun | | GaryRathbun@PrivateWealthConsultants.com
As I wrote about last week, now that the election is over and President Barack Obama has been re-elected, the question becomes, now what? What do you do over the next four years to protect and grow your investments?
Statistically speaking, it generally doesn’t matter which party gets elected, the market will be about the same. There is some data that suggests that the market will do better with a Democrat in office and do worse when a Republican is in office, but overall the market will perform very similarly either way.
The difference, however, comes from the different sectors. The market is made up of 10 different sectors ranging from consumer staples to manufacturing. The differences in return of the various sectors vary greatly depending on which party is in the White House.
Since Obama has won re-election, several sectors will benefit and several sectors will be neutral or negative. The first to look at will be the health care sector. The Patient Protection and Affordable Care Act, better known as Obamacare, set out new mandates and credits to employers and individuals.
Drug makers, insurance companies and hospitals will suddenly have a large number of new customers courtesy of the federal government and, of course, the taxpayers since they will ultimately be paying the bill.
Companies like Pfizer (NYSE: PFE) have gone up considerably since Obamacare passed and probably will continue to do well longterm since most of the benefits are still ahead. Smaller biotech companies will also benefit going forward if they are able to provide a new product and get it out of their pipeline.
Health insurance providers such as UnitedHealth Group (NYSE: UNH) have gone up since the passage of the legislation and will probably continue to benefit as more and more of the legislation is implemented.
For-profit hospitals will also benefit from full implementation of the legislation since the government (i.e., taxpayers) will provide payment.
Finally, managed-care companies will benefit by gaining millions of new customers who will now have access that they didn’t before.
Medical device companies such as Medtronic and Boston Scientific Corporation, will have a more difficult time, however, since there will be new taxes and fees on medical devices to help pay for this legislation.
Information technology and telecommunications will probably benefit by having a Democrat in the White House. This is traditionally true and I see no reason for this to be any different under Obama. He is very tech-savvy and illustrates the new normal in personal technology and handheld devices.
Agriculture will likely continue to benefit from Obama’s policies since he still is in favor of corn-based ethanol and international free-trade agreements that will help keep the price of products up and encourage exports.
Manufacturing is a sector that will probably still languish under this administration because the economic environment is such that companies are reluctant to invest capital and expand.
As the economy continues to struggle under excessive debt and increasing taxation, consumers will also be hesitant to spend on anything other than essentials and thereby put pressure on manufacturing earnings.
Consumer discretion will be negatively affected because it is likely that unemployment will remain high and inflation will become more noticeable in the next few years. Interest rates will likely stay low but consumers will not be motivated to go into debt. In fact, consumer debt still continues to shrink most months as people work at getting their own balance sheets cleaned up.
Finally, defense contractors and providers will likely face challenges going forward since the fiscal cliff is looming and Democrats traditionally campaign on cutting military spending. Many of the scheduled cuts that start on Jan. 1 are in the military and defense areas and I can see many of those cuts remaining in place.
Of course, precious metals will always be a buy or at least a hold. This would be the case no matter which candidate won, as Mitt Romney would have had to face the same fiscal issues as Obama.
Next week I will look back over the past year that I have been writing this column and reflect on my thoughts and your responses.
Gary L. Rathbun is the president and CEO of Private Wealth Consultants, LTD. He can be heard every day on 1370 WSPD at 4:06 p.m. on “After the Bell with Brian Wilson and the Afternoon Drive” and every Wednesday and Thursday evening at 6 throughout Northern Ohio on “Eye on Your Money.” He can be reached at (419) 842-0334 or email him at email@example.com.