With the 2012 presidential elections only a few days away, folks in Washington, Wall Street and Main Street are gearing up to see who will occupy the coveted Oval Office come January. As with any election, there are, of course, those who are still raising their metaphorical pitchforks, slinging mud at the two candidates, and preaching from their soap boxes about why their presidential pick is obviously the only reasonable one out there. Regardless of the media hoopla, voters are still faced with the choice; will it be Romney’s “Five Point” plan that will create more jobs and more take-home pay, or will “moving forward,” not backwards, be the answer to our nation’s problems?
For investors, this year’s presidential elections will be an important one, as both candidates present radically different plans that will ultimately affect everyone’s bottom line. But, of course, on Wall Street, there is always a winning play for whichever candidate claims the victory. Below we outline some of each candidate’s key campaign points, as well as which ETFs could profit from either a Romney or Obama win [see also How To Pick The Right ETF Every Time]:
Taxes: arguably one of the most important issues every election, and for many, it’s the deciding factor when they cast their vote. Both sides of the camp agree that cutting our nation’s massive, and growing, debt pile is key to getting our economy back on track. But how each candidate would go about tackling this seemingly impossible task differs drastically [see also Third Time's A Charm? Best ETF Plays For QE3].
Obama: President Obama’s main objective is to “Protect the middle-class by making everyone, including millionaires, pay their fair share.” His plan involves raising taxes for the upper echelon of tax payers, implementing tax cuts for small businesses and the middle class, eliminating tax breaks for companies that send jobs and profits overseas and, perhaps most importantly, raising the capital gains tax rate.
Russell Microcap Index Fund (IWC): iShares’ IWC offers investors exposure to the micro-cap sector of the U.S. equity market. With Obama being a champion for small businesses, this ETF may stand to attract more investors’ attentions.
Romney: A self-proclaimed business man, Romney feels that the answer to our nation’s debt problems is to employ a “top down” economics approach when it comes to taxing. The presidential hopeful’s plan is to make permanent, across-the-board, 20% cut in marginal rates, maintain current tax rates on interest, dividends and capital gains, and eliminate taxes for taxpayers with AGI below $200,000 on interest, dividends and capital gains [see also Monthly Dividend ETFdb Portfolio].
SuperDividend ETF (SDIV): This ETF is designed to track the performance of 100 equally weighted companies that rank among the highest dividend-yielding equities in the world. And with a current juicy 7.36% distribution yield, a Romney tax cut would make this option even more appealing.
Obamacare vs. Romney’s “Consumer Choice”
Obama: The now infamous Obamacare plan seeks to increase access and affordability by holding insurance companies more accountable, as well as strengthening and expanding Medicare. In addition, Obama has emphasized the need to expand free preventative services as well as lowering costs on prescription drugs and monthly premiums.
Dow Jones U.S. Pharmaceutical Index Fund (IHE): This popular Pharma ETF, holds a basket of 40 major U.S. pharmaceutical companies, with Pfizer, Johnson & Johnson, and Merk & Co allotted the heaviest weightings. IHE may be a good long-term, buy-and-hold option if you believe that more individuals would be insured under Obamacare, which would therefore increase the consumer base of pharmaceutical companies.
Romney: Romney has made it crystal clear that the first thing he would do if he were to win this election would be to repeal Obamacare. In his healthcare plan, he would implement more state control over Medicaid, promote competition in the private insurance market, and provide “premium support” (better known as “vouchers”) for Americans to choose between traditional Medicare coverage or private insurance.
Dow Jones U.S. Health Care Providers Index (IHF): This ETF portfolio consists of some of the biggest names in the health insurance industry, including UnitedHealth Group (UNH), Cigna (CI), Aetna (AET) and Humana (HUM). Whether or not you agree with Romney that increased private insurance competition would ultimately lower profits, this ETF is likely to see a nice spike at least in the short-term as more Americans would pile into the private insurance pool.
Fueling America: Big Oil or Alternative Energy?
Obama: The President’s campaign is to take an “All of the above approach to energy independence.” This includes doubling fuel efficiency standards, increasing natural gas and oil production at home, as well as expanding the use of solar, wind and “clean coal” energy.
WilderHill Clean Energy Portfolio (PBW): This perhaps is an obvious choice, as PBW is by far the largest and most popular choice for alternative energy investments. While the fund has suffered over the last few years, an Obama re-election could give PBW a much-needed boost.
Romney: In regards to alternative energy, Romney would pull government subsidies and take a free market approach, allowing only the best and brightest green energy companies to come out on top. For America to become an energy superpower, Romney believes the answer lies in private-sector-led development (i.e. Big Oil & Gas).
Alerian MLP Index ETN (AMJ): AMJ is by far the largest and most popular MLP ETP, offering investors exposure to the biggest names in the natural gas and oil pipeline industry. If Romney wins, he has promised to approve the Keystone XL Pipeline, which would likely send AMJ skyward.
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Disclosure: No positions at time of writing.