Presidents Should Affect Your Stock Picks, NOT your Exposure

Whether or not you liked Donald Trump, we can say for certain …

He was good for traders and investors.

The Dow set 126 new record highs in Trump’s term — which was slightly more than Obama, in half the time — and returned 56%.

The S&P 500, meanwhile, was up 68% from Trump’s inauguration until market close on Tuesday.

Many on Wall Street assumed that would not be the case.

Remember when he was elected, plenty of traders’ knee-jerk reaction was to DUMP S&P 500 futures …

And they were ultimately proven wrong.

The morning after Trump was elected, I went on-air in Canada.

I explained to a flabbergasted anchor that the selling was silly and that the market was going to bounce. You can watch that interview right here.

This time around, my sentiment is exactly the same …

Don’t bail.

Here are the market returns during every president’s tenure dating back to before the 1929 crash:

The S&P 500 goes UP.

That doesn’t mean every stock will kill it during Biden’s presidency, of course.

Just because the index rises, not every stock will go on a run.

There will be winners and losers.

So choose carefully … 

Picking on Biden
With that in mind, here is my sector-by-sector short list of investment picks for the first two, and likely four, years of President Biden’s first term ..

Energy

I think BOTH green and non-green energy are going to do great over the next 4 years.  Green energy is going to see A LOT of government subsidies. However, I think there is more money in fossil fuels because of the production squeeze that is already starting.

The 1st thing Joe Biden did after inauguration is kill Keystone XL.  That is a sign that exploration on federal and tribal lands is going to slow or stop.

This means less supply at the exact time there is going to be an increase in demand.

I would be a buyer of XLE, notably the conglomerates.

I am a buyer of long-dated calls in XOM … I think it will back to 90 in 2 years

Healthcare

Medicare and Medicaid expansion is a HUGE win for big, managed medicine and hospitals.  

In the short term I would be a buyer of hospitals, especially as Covid ends.

At the same time, the big drug stores are trying to DISRUPT the system.  

WBA and CVS will be places MANY of us end up going in lieu of the ER for non-emergency emergencies (broken wrists, etc.).

I still love WBA. At this point I would be buying the January 2022 50 calls instead of the January 2022 40 calls that I originally posted on New Year.  Because Walgreens Boots Alliance (wba)  has already rallied from 39 to 48 since I wrote that argile  

WBA is making behind-the-scenes moves that will change the way we think about the drug store chain.

I like CVS as well, just not QUITE as much as WBA. (It has less ground to make up; I think what it is trying to do is more known.)

Industrials

I love XLI. Who more than the industrialists will benefit from the economy opening up, a huge infrastructure bill and owning hard assets if there is inflation?

Nobody, that’s who.

I love CAT, DE, HON, OH and with no Keystone XL, the rails.  

A name that has a ton of ground to make up, that I think is going to be a huge winner of a stock in the next four years is, MMM.

I would again be a buyer of long-dated calls.

Another name that I LOVE is GE.

The GE Jan 12 calls for 1.80 in particular are a steal. With WBA already up 20% (from my “best pick for 2021” article), GE Jan 12s are my next best trade for 2021.

I think GE is going to 20. If that happens, these calls will be worth 9 bucks … and a cool 400% return sounds pretty nice to me.

Twenty of these for 1.80 ($3,600 total), will have me over $12,000 when I am right …

There are other winners, obviously, but these are definitely my top-3 areas.

Next time, I’ll go through my losers.

Your Only Option,

Mark Sebastian


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