An investment advisor’s duty is to form an opinion about the future to make decisions in the present. However unpleasant this task appears, given tenor of the presidential race, we’ll soldier on. White House policies modestly influence capital markets in the short-term, but have little effect on economic fundamentals in the long-term.
Hilary Clinton has the best chance to win the White House, despite her disfavor with the general public. The House will probably remain GOP. The Senate is a toss-up but neither side will be able to gain a filibuster-proof majority. Thus, a gridlock scenario lends itself to a terrific bipartisan cooperation opportunity.
Pursuing a divisive agenda with bitter debates only makes Clinton’s reelection chances worse. Her best bet is to get substantive things done in her first term. Areas of consideration include narrowing the deficit, fixing the tax code, repairing infrastructure, rebuilding the military, reforming immigration and shoring up entitlement programs.
The good news is Speaker Ryan is eager to tackle the big problems and Senate leaders Schumer and McConnell are action-oriented, in touch with their base.
The finance sector will probably be hit with further regulatory pressures but the big banks won’t be broken up. Insurers and ‘price gouging’ bio-tech firm will experience pain from needed healthcare reform, but hospitals will feel fine with an expanding patient base.
Fossil fuel firms will fizzle in light of Clinton’s alternate energy mandates while solar and electric cars will have their day in the sun through subsidies. Industrials benefit from a infrastructure push, though Obama’s plan didn’t work.
One big issue which won’t see much progress is tax reform, due wide differences in the parties’ world view. We may see the hedge fund manager’s ‘loophole’ closed, but not much more.
Entitlement reform will also have a difficult time working through each side’s differences, but the yawning deficit could force their hand.Trade may be the surprise, although she has tacked away from reform. A wide swath of the electorate stands to gain.
Fortunately, the underlying economy is in good shape with stable labor markets and prices while the consumer continues to spend. No matter what happens, we expect markets to be OK for 2017.