The Market Is Bullish On These 11 Stocks

The official presidential election season is now underway. Both parties have held their nominating conventions, and we have less than a hundred days until we know who will be the 45th president of the United States. With both candidates sporting the highest unfavorable ratings since those statistics were first measured and facing multiple scandals dogging both nominees, it seems fairly certain this will be one of nastiest contests for the White House in memory. No one exactly knows how this match-up will play out, but here are my four election predictions nonetheless.

Prediction 1: The “winning” candidate will receive 45% or less of the popular vote. With the Libertarian Party polling almost 10% recently and the Green Party with near five percent, either major candidate that gets 45% of the vote is probably the winner. This is a “voting against” election more than any contest I can remember. Mr. Trump and Mrs. Clinton are currently neck and neck in the polls although the latter has an easier electoral path to victory. I think whichever party wins the presidency will get thumped in the 2018 mid-terms as the outcome will not resolve the current political rancor of the nation.

Prediction 2: This lack of election mandate means that we will continue to have divided government after the election. To this point, Mr. Trump has not been the albatross around the Republicans’ neck that a good portion of the media thought he would be. This obviously could change before the election, but right now the Republicans look sure to keep their hold on the House and probably have a 40% to 50% chance of maintaining their leadership of the Senate as well.

CELG YTD

ABBV

This means no major legislation will be able to get through without some bipartisanship support. In terms of how this will affect the market could mean fears around measures to restrain drug prices are probably overblown. This is one reason the biotech and pharma sectors have behaved much better recently after being locked into a bear market for most of the last year. Better than expected earnings from biotech stalwarts, AbbVie (ABBV), Amgen (AMGN) and Celgene (CELG), which all beat on the top and bottom line consensus, certainly were helpful as well. With the large caps in these sectors still near five-year lows as far as valuations are concerned, I am overweight both areas in my portfolio. These industries are also some of the few seeing good revenue and earnings growth even with these challenging global headwinds.

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Disclosure: Long ABBV, AMGN, CELG, ...

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