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TPA MARKET GAMEPLAN FOR THE PRESIDENTIAL ELECTION

TPA MARKET GAMEPLAN FOR THE PRESIDENTIAL ELECTION

TPA sees 2 drastically different performance patterns forming depending on the outcome of tomorrow’s election. TPA will not prognosticate and predict a winner. The national polls show Biden has a sizable lead (summary at the bottom of this report), but the polls were incorrect in 2016. Many pundits have also said that many Trump supporters do not want to admit to a pollster that they are going to vote for Trump. This seems to fly in the face of the pride and bravado that can be seen on the news and in the streets of our towns. Over 90 million votes have already been case. Many experts say early voting favors Democrats, while others say Republicans are highly motivated to cast their votes.


Whatever the outcome, clients would be wise to think through the possible ramifications of each scenario and to develop a gameplan.

TPA’S TAKE ON THE ELECTION SCENARIO

Below is a summary of TPA’s ideas for what each scenario will mean for the markets and for sectors and subsectors.

1. Decisive presidential victory for either party will be a big positive for all markets in the short term. S&P500 could rally 5% to 7% in the short term.

2. A substantial delay in results or a contested election could result in a sizable stock market decline: 5% to 7% if it is less than a week, but considerably more if there in the case of along delay.

3. Trump victory will mean more of the same from the past 4 years

· lower taxes

· less regulation

· increased military spending

· friction with other countries (tariffs, etc...)

· a performance pattern like the end of 2016 for the first few days:

Positive (Sector/ETF):

Ø Financials (XLF, KBE)

Ø Energy (XLE, XOP, OIH)

Ø Telecomm

Ø Transportation (IYT)

Ø Defense (ITA)

Ø Industrials (XLI)

Ø Materials (XLB)

Ø Homebuilders (ITB)


Negative (Sector/ETF):

Ø Gold (GDX, GDXJ)

Ø BIGTECH, TECH (XLC, XLK)

Ø Staples (XLP)

Ø Utilities (XLU

Ø Healthcare (XLV)

4. Biden victory will mean:

· higher taxes on rich and corporations

· lower taxes for wide swath of the population

· more regulation (on Financials, Healthcare, Industry, monopoly TECH

· less military spending

· less friction with other countries.

5. Democratic sweep will mean the same as #4, but on steroids.

TPA’s Gameplan

In order to develop a gameplan, TPA looked at the relative performance of sectors and subsectors in 4 periods (see table below):

1. 2016 following the presidential election. This shows how stocks reacted to a Trump presidency and is the likely reaction that will take place immediately after a 20202 Trump win.

2. Performance since 11/8/16 shows how areas of the market have faired during a Trump presidency.

3. 2020 YTD represents this year’s performance patterns, which of course include Covid-19

4. The recent one month performance, which indicates how people are positioning themselves for the election.

Since, TPA does not know who will be elected or the possible drama that may unfold in a contested election Use calendar below to see timeframes from here to the end of 2020, the gameplan below is based on the predilections of each candidate, TPA’s on-going investment themes, and technical analysis of sectors and subsectors.

Regardless of President, TPA clients should look for opportunities to position themselves for 2021

· Buy:

Ø “Non-monopoly” TECH (Not AMZN, GOOGL, GOOG, FB, AAPL)

Ø Homebuilders (ITB) (Shortage of housing & Pandemic exodus from cities)

Ø Automation (ROBO)

Ø Transportation (IYT) (49% FDX, UPS & Railroads)

Ø Small Cap Growth (VBK)

· Sell:

Ø Energy (XLE, XOP, OIH)

Ø Monopoly TECH (XLC) (AMZN, GOOGL, GOOG, FB, AAPL)

Ø Office, Retail, Apartment REITs

· Pair – Retail to outperform AMZN

Ø Buy: XRT (even-weight Retail) vs. Sell: XLY (22% AMZN)

Biden

· Sell:

Ø Financials (XLF, KBE, KRE)

Ø Healthcare (XLV) (Managed Care, Drugs)

Ø Defense (ITA)




https://www.realclearpolitics.com/epolls/2020/president/us/general_election_trump_vs_biden-6247.html


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