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Oct 23, 2020

Stocks to Watch as Election Day Approaches

Successful traders don’t think defensively. Each day is a new attack and outside noise like election results don’t typically affect us. Money is made and lost while riding the waves of volatility. The only charts that matter are the ones that show us stock patterns.

Investors need to think differently. We have a presidential election coming up in November. There are also a number or congressional and senate seats up for grabs. The results at the end of that day could change to outlook for some of your favorite long-term investments.

In this article, we’ve laid out a strategy to position investors for any outcome on election day. We’ve also included a few recommendations for stocks to buy when your candidate (or the other guy) gets elected. As always, use Tickeron to analyze these before buying. 

Stocks to Buy Regardless of Outcome

There are certain stocks that should rise regardless of who wins the election. Keep in mind that the vote is tallied on November 3rd, but the winning candidate will not take his oath of office until January. The market typically gets a bit bullish during that two-month waiting period.

In 2016, when Donald Trump beat Hillary Clinton, the S&P 500 jumped 6.4% in the sixty days immediately following election day. That’s not typical. The index has risen in seven of the past ten elections, but at an average rate of just 0.7%. In other words, don’t expect miracles.

Certain sectors will do better than others. If you’re looking for safe bet, go with the Industrial Select Sector SPDR ETF (XLI). The momentum indicator moved above zero on October 5th and the fund is up 5.33% already in the past month. This sector has been projected to do well. 

If you’re looking for an individual stock in the industrial sector, check out Rockwell Automation (ROK). The company is 117 years old and has outperformed the S&P after each of the past six elections. It’s an even safer bet this year. Their stock is up 23% already this year.

Energy stocks typically do well after an election, but this year could be different. The two candidates have very different views and policies on energy, with Biden pushing more for electrification and Trump still firmly behind petroleum-based energy.

If you must invest in the energy sector, look at Cabot Oil and Gas (COG). They’ve actually performed fairly well through the pandemic and are expected to report a 20% rise in earnings on October 29th. That should give you a boost going into election day.

To hedge your bets, buy an equal amount of Tesla (TSLA) when you buy Cabot. They recently came out of the overbought zone (which we predicted) and are expected to uptrend right on time for the election. Earnings are down, but the upside could be huge.    

Stocks to Buy if Trump Wins

Don’t believe the polls. The race is closer than it appears and either candidate can win. If Trump secures a second term, you can expect certain sectors to surge and others to maintain the steady growth they’ve achieved over the last four years. 

Analyzing how the election will affect the stock market begins with understanding how each camp is campaigning. Trump is a xenophobe, fanning the flames of distrust of the Chinese, blaming them for the pandemic in the United States. 

That paranoia creates a level of tension that fuels the defense industry, driving stock prices up in companies like Lockheed Martin (LMT) and Raytheon (RTX). Lockheed Martin is actually a good buy right now, since it’s down nearly 7% since the beginning of the year.

Trump is also a proponent of second amendment rights and believes all Americans should be able to purchase firearms. That could bode well for Smith and Wesson (SWBI) and Ruger Firearms (RGR), though both have been in downtrend for several months. 

As a political party, Republicans favor smaller government and fewer regulations. Industries that have benefited the most from this during the Trump administration include the energy sector and financial services firms. There are different ways to invest in each of these.

For the energy sector, take advantage of the last few years of oil and gas dominance if Trump gets reelected. We’ve already mentioned Cabot Oil and Gas (COG). Another good bet, at least in the short term, is United States Brent Oil (BNO). Tickeron’s AI shows an 86% chance of uptrend. 

In the financial sector, expect Wells Fargo (WFC) to rise back to prominence if Trump stays in office. They’ve seen some hard times recently after a phony account scandal but have restructured and are showing signs of life. We have them as a solid “buy” right now.

If you’re looking for a financial services ETF, take a look at the Financial Select Sector SPDR Fund (XLF). All of our signals show that it’s in uptrend and will continue there for several weeks. A republican sweep in the election could cause that trend to continue into next year.

Of course, none of this is guaranteed if there are additional shutdowns in the United States due to a Covid-19 second wave, but we’ll get into that further below. As always, we recommend you check your Tickeron Signals before buying anything and stay alert for unexpected changes. 

Stocks to Buy if Biden Wins

At no point in recent history have two presidential candidates been so far apart on business and economic issues. While Trump wants to remove regulations and obstacles to business expansion, Biden would prefer the government control more of that.

A good example of this is the Paris Accord, a climate change agreement that Trump pulled out of early in his first term. The rationale at that time was that it was cost-prohibitive to businesses to implement the environmental measures required by the agreement.

Biden wants to get the United States back into the Paris Accord and adopt the Green New Deal, an even more drastic climate change proposal that could seriously damage oil, gas, shale, and coal companies in the United States. This could cause a major disruption on Wall Street.

If Biden wins, we’ll likely see a sell-off of petroleum stocks and renewed investment in renewables and alternative energy. Tesla (TSLA), a leading manufacturer of electric vehicles, will prosper no matter who wins. A Biden victory would make them the best bet of the year.

It’s difficult to predict which renewable energy firms will benefit the most since none of them have a historical track record of long-term success. If you’re looking to invest in this sector, choosing an ETF and letting the market do the work for you might be the best option.

One of the renewable energy ETFs we’ve been watching at Tickeron is the iShares Global Clean Energy ETF (ICLN). It’s showed record-breaking daily volume in the past month, likely due to Biden being ahead in the polls. Our signals have it firmly in bull territory.

Another ETF in the renewable energy sector is the SPDR Kensho Clean Power ETF (CNRG). This is an interesting watch because we’re getting mixed signals on it. For much of the year, it was overbought, a condition it recently emerged from. A Biden win should make it go up again.

The Biden camp is also pushing for more money to be infused into the health care system and an increase in Covid-19 testing throughout the United States. There are a number of companies that could benefit from this, but it’s dependent on congressional approval.  

If additional testing and monitoring is approved by congress, look for Microsoft (MSFT) to be one of the beneficiaries of that. Bill Gates has been working on tracking technology that may go mainstream if the democrats take control in November.  

Winners in the Pandemic Policy Debate

Covid-19 is still out there and can alter any of the predictions we’ve made in this article. The way in which each candidate plans to handle pandemic response will cause multiple companies to either succeed or fail, particularly in the biotech industry.

Investing in biotech is a high risk/high reward proposition. The race for a Covid-19 vaccine has been an example of that. AstraZeneca (AZN) and Pfizer (PFE) were in the driver’s seat until they hit setbacks in clinical trials. Now they are in downtrend. 

Moderna (MRNA) is also in downtrend right now, but has shown more potential in recent months. They seem to be in the best position to produce a vaccine first. Does that make them a good investment? It’s impossible to answer that before the election.

Trump has been fast-tracking the FDA for approvals to get a vaccine out quickly. Biden has stated on many occasions that we don’t want to rush into anything. The winner of this election is literally holding the future of these biotech companies in his hand.

Prior to the election, we recommend only small investments in biotech. When it’s over, stick to short-term trading in the space. Some of these firms may look like long-term winners, but they are not. Returns in biotech are like shooting stars. They burn out quickly. 

Related Ticker: XLI

XLI's RSI Oscillator peaks and leaves overbought zone

The 10-day RSI Indicator for XLI moved out of overbought territory on April 01, 2024. This could be a sign that the stock is shifting from an upward trend to a downward trend. Traders may want to look at selling the stock or buying put options. Tickeron's A.I.dvisor looked at 42 instances where the indicator moved out of the overbought zone. In of the 42 cases the stock moved lower in the days that followed. This puts the odds of a move down at .

Price Prediction Chart

Technical Analysis (Indicators)

Bearish Trend Analysis

The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 7 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where XLI declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

XLI broke above its upper Bollinger Band on March 19, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Bullish Trend Analysis

The Moving Average Convergence Divergence (MACD) for XLI just turned positive on March 21, 2024. Looking at past instances where XLI's MACD turned positive, the stock continued to rise in of 45 cases over the following month. The odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where XLI advanced for three days, in of 359 cases, the price rose further within the following month. The odds of a continued upward trend are .

The Aroon Indicator entered an Uptrend today. In of 329 cases where XLI Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Fundamental Analysis (Ratings)

Fear & Greed

Notable companies

The most notable companies in this group are General Electric Company (NYSE:GE), Caterpillar (NYSE:CAT), Uber Technologies (NYSE:UBER), Union Pacific Corp (NYSE:UNP), Honeywell International (NASDAQ:HON), United Parcel Service (NYSE:UPS), Boeing Company (NYSE:BA), Deere & Company (NYSE:DE), Lockheed Martin Corp (NYSE:LMT), Illinois Tool Works (NYSE:ITW).

Industry description

The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in the Industrial Select Sector Index. Under normal market conditions, the fund generally invests substantially all, but at least 95%, of its total assets in the securities comprising the index. The index includes companies that have been identified as Industrial companies by the Global Industry Classification Standard, including securities of companies from the following industries: aerospace and defense; industrial conglomerates; marine transportation. It is non-diversified.

Market Cap

The average market capitalization across the Industrial Select Sector SPDR® ETF ETF is 50.29B. The market cap for tickers in the group ranges from 7.6B to 191.9B. GE holds the highest valuation in this group at 191.9B. The lowest valued company is GNRC at 7.6B.

High and low price notable news

The average weekly price growth across all stocks in the Industrial Select Sector SPDR® ETF ETF was 0%. For the same ETF, the average monthly price growth was 3%, and the average quarterly price growth was 26%. GNRC experienced the highest price growth at 8%, while MMM experienced the biggest fall at -10%.

Volume

The average weekly volume growth across all stocks in the Industrial Select Sector SPDR® ETF ETF was 8%. For the same stocks of the ETF, the average monthly volume growth was -6% and the average quarterly volume growth was -23%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 69
P/E Growth Rating: 46
Price Growth Rating: 32
SMR Rating: 47
Profit Risk Rating: 36
Seasonality Score: -7 (-100 ... +100)
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XLIDaily Signal changed days agoGain/Loss if shorted
 
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