Investors know that Election Day is just a few weeks away and
they know financial markets will let the world know if the
outcome is desirable right away. Some sector ETFs are arguably
already pricing in one outcome
.
However, the polls show a nail-biter of an election is coming,
so savvy investors will be preparing for either result. Everyone
is entitle to their own opinions regarding President Obama and
Republican challenger Mitt Romney, but know this: Beating an
incumbent is hard. There have been 18 presidential elections
since 1940, but only three incumbents have lost in that time -
Gerald Ford in 1976, Jimmy Carter in 1980 and George H.W. Bush in
1992.
In other words, it might be a good idea to prepare for an
Obama reelection and these ETFs can help investors do just
that.
ProShares UltraShort Oil & Gas (NYSE:
DUG
)
The ProShares UltraShort Oil & Gas is a double-leveraged
bearish play on the index tracked by the iShares Dow Jones U.S.
Energy Sector Index Fund (NYSE:
IYE
), but DUG works as a hedge against most traditional energy
ETFs.
Putting a bearish oil fund on a list of Obama reelection ETFs
is tricky for two reasons. First, ETFs such as IYE and the Energy
Select Sector SPDR (NYSE:
XLE
) are up during the president's time in office. Second, so is
U.S. oil production.
What is important to note about increased U.S. oil production
is where it is happening. It is not happening offshore
nor on federal public lands
. Critics would blame that on the Obama Administration. Oil
production is increasing in states such as North Dakota and Texas
in places like the Bakken and Eagle Ford shales where state
commissions, not the federal government, dole out most of the
exploration and production permits.
This is not a criticism of President Obama, but it does not
take a political science professor from Harvard to figure out the
politics of North Dakota and Texas are about 180 degrees removed
from President Obama.
More importantly, this year stocks are higher, but only the
Utilities Select Sector SPDR (NYSE:
XLU
) is less correlated to the S&P 500
than XLE has been
. After XLU, XLE is the second-worst performing sector SPDR this
year,
according to State Street data
.
PowerShares Global Wind Energy Portfolio (NASDAQ:
PWND
)
Now this might be the type of energy ETF that benefits if the
president is reelected. In the debate Tuesday night, President
Obama did agree with Romney that fossil fuels are part of the
energy equation in the U.S. However, the president also
reiterated his commitment to alternative energy. In the process,
he pontificated about folks in Iowa love good-paying wind energy
jobs.
On the surface, it would appear the PowerShares Global Wind
Energy Portfolio would be a logical winner should the president
nab a second term. Be careful though. This ETF is off 30 percent
in the past three years, indicating the Obama Administration has
not been the boon for wind energy stocks that some would have
thought four years ago.
iShares Dow Jones U.S. Healthcare Providers Index Fund
(NYSE:
IHF
)
Companies such as UnitedHealth (NYSE:
UNH
), IHF's largest holding with a weight of 14.4 percent, have been
at the epicenter of the Obamacare debate. Now that insurance
providers and hospital providers can prepare for the law, dark
clouds hanging over these stocks has arguably come and gone. The
good news
Obamacare could mean plenty of new business for
IHF constituents
.
Even Romney wins, it would take too much time and too much
precious political capital to overturn Obamacare in the first
half of his first term. Conceivably, Romney's attempts to abolish
Obamacare could prove futile at best.
For more on ETFs, click
here
.
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