Where is Superman when we need him? With the market moving in ways we never thought possible, we need a superhero to well, help save the day. Cue music ... Barack Obama to the rescue!
Okay, so his powers are not a magical solution. Still as the newest and shiniest superhero of the moment, there are expectations that he will do something to stop this horrible economic spiral we are in. Please save the day, Mr. President-Elect!
As we wait to see what Barack does, what can you do today to position your investment strategy for an Obama administration? Here are some ideas.
First, understand that the Obama impact on overseas trade will likely be dependent not only on political philosophy but pragmatic concerns. Changing trade agreements during the worst downturn in 75 years is a marginal proposition at best, and will likely lead to shrieks of protectionism from critics.
With the Chinese economy softening and the rest of the world struggling to find stable ground, Obama’s concerns about trade agreements affecting the livelihoods of American workers is a secondary issue relative to economic growth and stability. Net result: I wouldn't worry about protectionist strategies for the time being. There are bigger disasters to avoid. And Superman can only focus on one disaster at a time.
Healthcare however, is a different matter completely. Despite the Obama Administration assigning Hillary to the outer reaches of the world, healthcare will be a priority on the domestic front. Drugmakers such as Pfizer could benefit. But watch to see if price controls are mandated. Selling a product at no profit tends not be a great business model.
Another area to monitor is alternative energy. The President Elect is a supporter of clean energy. But be careful: with crude oil prices hitting four-year lows, green energy might get lost with the wind. Human nature will likely result in consumers (in the U.S. and Asia alike) quickly forgetting the pain of high oil prices.
Here comes Infrastructure spending! Under the Obama Administration you will likely see higher government spending. Companies that provide services to build infrastructure will likely have more contracts. Companies like General Electric , that provide core industrial construction services, including power plants, could get a tailwind.
In the long-term, Obama policies, because of higher deficits, will likely lead to higher interest rates. We simply cannot print trillions of dollars and not pay the price someday and the price the U.S. will pay is higher interest rates. Keep that in mind when you are buying fixed income assets. Stagflation will be a concern.
One other quick investment idea in the land of Obama that might make some sense --convertible securities. These assets are priced at crazy low values because of the current U.S. financial crisis. They provide yields and opportunity for capital appreciation when the recovery comes.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of the firm and has over 20 years investment and financial planning experience. Michael is a respected lecturer, speaking frequently on tactical asset allocation theory and appears regularly on CNBC and CNBC Asia. Michael can be reached directly at firstname.lastname@example.org.