It is interesting to take a look at how organizations like Morgan Stanley are advising investors about what is likely to happen in this election. Here is what they said in a note they sent out yesterday.
“With Trump’s chances fading, and Clinton’s lead growing, the ‘Democratic Sweep’ now carries greater, albeit still small, odds, raising the prospects for increased infrastructure spending and for heavier regulation of the financial and pharma sectors…”
Here’s what Julie Verhage is hearing from the folks at Goldman Sachs:
Asset classes that could see the largest impacts from a Democratic sweep include pharmaceuticals, financials, and broader risk assets. Pharma and financials would both face negative headwinds from the potential of more regulations given comments from Clinton and other Democrats, while risk assets could benefit from more infrastructure spending which both candidates have talked about increasing.
When looking more broadly at health care stocks, Oliver Renick and Rebecca Spalding note that their value has come down as Clinton’s lead widened.
The weakness is a departure from the past five years, when health-care’s 128 percent advance through 2015 ranked ahead of any other group. Now they’re down nearly 4 percent in 2016 as investors assess how the industry will fare should Hillary Clinton be elected president. The group posted a 3.3 percent decline last week, the biggest five-day loss since February.
“You have a perfect storm — you obviously have the headline risk associated with the election,” Craig Sterling, head of U.S. equity research at Boston-based Pioneer Investment Management, said by phone. “There’s a much brighter light on the whole system. Whether this is temporal or not, it’s hard to know. If Hillary Clinton gets elected, it seems to be like there will be continued interest in it.”
In other words, if we have a Democratic sweep of the presidency and Congress in November, investments in pharmaceuticals and the financial services industry would not be a good bet. Hmmmm….why would that be? Is it possible that Wall Street believes that Clinton and the Democrats would actually do what they are promising to do in this election? Apparently so. That might come as a bit of a surprise to those who assume that our politics are rigged to merely do the bidding of Wall Street and corporate America.
