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Election Year Investing: What the Next 365 Days Could Mean to Your Portfolio

Written by Thomas Chenoweth

Monday, 05 November 2007

One year from now I will be sipping on morning coffee while reading about who won the 2008 presidential election. History has shown that the Stock Market does very well during election years, but many variables come into play in this election and an in depth study may help clear the fog.

Photo:Dennis Sylvesterhurd, Creative Commons, Flickr

As I witness today’s market risks, and economic policy proposals as diverse as the candidates themselves, I can’t help wondering what impact these intentions will have on business, jobs, taxes, and credit.

I see an economic slowdown materializing day by day with geo-political risks continuing to rise, and an Asian bubble just waiting for a reason to burst. If Uncle Ben and his cohorts at the Fed could act with a greater sense of urgency, the recession might not come as fast and furious. Either way, our new President will have a lot on the plate.

I decided to put together a small model portfolio of what I would like to call the "Ultra Election Strategy."

I am not endorsing any particular candidate or party, nor am I able to predict with any certainty what new policies, foreign and domestic, will have on the performance of this portfolio. But I thought it a good time to take a look at one year from now with a few sector ETF long and short predictions. I am a big fan of the new Ultra ETFs that trade, so I amtailoring the portfolio to include only these funds.

My biggest prediction is that a democrat, probably Hillary Clinton, will win (She actually looked like a sure bet three years ago). However, contrary to the successful performance of the stock market under Democratic presidents, the market under Bush has done very well and has outperformed the average year's performance while the Democrats held the big house. This could be a forewarning that times are changing and the scenario of the new President walking into a recession could make post election performance challenging for the markets. Time will tell.

I also remember with clarity the damage to big Drug stocks the first time Hillary took on healthcare, so if she moves up in the polls, I would stay clear of this group. No matter who wins, any radical new healthcare plans are sure to sharply affect these types of stocks. The following list represents the rest of the overall portfolio strategy and willbe adjusted accordingly at the end of each quarter.

Bullish

Nasdaq 100 - Ultra QQQ Proshares (QLD - $120.06)

Technology - Ultra Semiconductor Proshares (USD-$82.21)

Ultra Technology Proshares (ROM-$95.87)

Financials - Ultra Financials Proshares (UYG - $49.17)

Utilities - Ultra Utilities Proshares (UPW - $86.70)

Consumer Services - Ultra Consumer Services (UCC - $59.78)

Bearish

Healthcare - Ultrashort Healthcare Proshares (RXD - $66.28)

Consumer Goods - Ultrashort Consumer Goods (SZK - $64.00)

Real Estate - Ultrashort Real Estate Proshares (SRS - $98.95)

Neutral

Energy

Materials

Homebuilders

Disclosure: I do not own these ETFs as of this post, but I always wanted to put together an overall ETF market strategy using only the Ultra Proshares.

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Thomas Chenoweth

Comments (3)

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written by alphuris , November 06, 2007

Why do you feel Energy is going to be Neutral? I would think under Clinton, who's page offers $70 billion to alternative energy and retooling of existing energy would be a sign of strength in that industry. I have no clue where she plans to get the money from, but $70 billion is a lot to invest in a sector to me.

It seems like Giuliani doesn't have Energy as a platform issue (at least on his website) and the other repubs don't seem to be taking that angle either.

I guess I'd say energy would be neutral under a non-dem government and bullish under a dem government.

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written by Thomas Chenoweth , November 06, 2007

I can make a bullish and bearish case therefore I am neutral. What goes up many times goes down just as quickly.
Also regardless of the amount of investment into a particular industry or sector, doesnt mean it will be profitable or investment worthy. Now if you ask me has Energy been a great investment, of course the answer is yes as a whole in today's climate "no pun intended", but there are still many segments of this group that yet to find commercial viability. Oil stocks themselves may have been great plays the last couple of years with their meteoric rise along with the price of a barrel of oil itself. What happens tomorrow if say one of the new aternative energy concepts replaces dependence on oil, then guys like TBoone need to retire or find another hobby.

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written by David Neubert , November 11, 2007

I'm with you on energy. Demand is going up no matter who is president. Though I do think the subsidies for oil exploration that Bush gave to oil companies may be replace by subsidies to oil companies for alternative energy investment. These guys have very qualified lobbyists with connections in both parties working for them and will extract money from the taxpayer no matter who is in power.

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