Every time we have a presidential election pundits, and other talking heads trot out lists of stocks that are likely to benefit if one candidate or another wins. Each of these articles lays out a plausible sounding reason why it makes sense to change your portfolio based on the outcome of the election.
For example, here’s an article outlining why Apple (AAPL), Exxon (XOM), and Smith & Wesson (SWHC) would all benefit under a Trump administration.
Similarly, here’s a list of supposed companies ready to rock if Clinton takes the White House including: Lockheed Martin (LMT), HCA Holdings (HCA), and Aetna (AET).
And while it’s certainly possible that one candidate or another’s proposals might indeed provide a tailwind to certain industries, consider this:
1. Presidents don’t make laws, Congress does.
While me may pelt candidates with all manner of questions for their policy views, as well as the unavoidable question of how they plan “to fix the economy” or “create jobs”, the fact is that the President’s job isn’t to control the economy, nor for that matter is it the role of the government at all. And since its up to Congress to actually convert ideas into legislation, the fact is that most of what the candidates propose on the campaign trail is irrelevant; simply because a grid locked Congress will get very little done.
2. The track record of such “Event driven” strategies is terrible.
For example, in 2008 numerous articles proclaimed that if Obama won you should:
Sell: Big banks, such as Bank of America (BAC), and Wells Fargo (WFC), (because of much harsher coming regulations), Oil stocks (environmentalist in chief Obama would bankrupt the oil industry), and gun makers (he’s coming for our guns don’t you know!?)
Buy: solar stocks and big auto makers (because GM and Ford will get bailed out by the government to protect Obama’s Union allies)
Well how exactly did these recommendations fair?