Hillary Clinton is now the first woman to be nominated by a major party for the U.S. presidency. And now that she has secured the Democratic Party nomination, speculation on the impact of her potential victory is ringing loudly on Wall Street.
As of June 15, Clinton had 43.4% chances of winning while her opponent Donald Trump had 38.3%, according to Huffpost Pollster. And as per PredictWise , the Democratic Party will see a sweeping win to the White House with chances as high as 76%, as of June 15. Needless to say, ears turned to what Clinton is saying in her election campaigns. Investors are examining the investing areas that are to surge if Clinton makes it to the office.
Below we highlight a few of Clinton's economic view and their impact on the ETF world.
Hike in Minimum Wages
Clinton seeks to hike the minimum wage from $7.25 to at least $12 per hour. This will hit several consumer discretionary ETFs. For example, the restaurant sector is a great example, as it employs a lot of such lower-income workers. On the wage hike issue, the ex-CEO of McDonalds (MCD), Ed Rensi, said that it would be a better option to purchase a robotic arm for $35K than paying an incompetent employee $15 an hour, a level another Democratic candidate Sanders was viewing as must-have.
As a result, Restaurant ETF (BITE) will likely be hurt by the implementation of minimum wage. While consumer staples ETFs like Vanguard Consumer Staples ETFVDC should benefit from this government move, one should note that restaurateurs bearing the brunt of higher minimum wages will eventually pass on this hike to increased menu prices and will turn more tech-savvy. All in all, consumer staples ETFs may not gain as much as they should (read: Consumer Face Off: Wal-Mart versus Amazon ETFs ).
Banks to Face More Stringent Regulations?
Clinton seeks to restrain extreme risk-taking tendencies among big financial institutions and curb risks lying underneath the shadow banking system. Clinton is in favor of levying a tax only on high-frequency traders who terminate a lot of orders .
While these stringencies are targeted at bringing about stability in the banking system, many of the profit generating corners of big banks will be hard bit due to this defensive sentiment. ETFs like SPDR S&P Capital Markets ETF (KCE) and iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) may suffer from such moves.
Spending on Infrastructure
Defense Outlays to Rise
Clinton has always been seen as a supporter of ' a strong U.S. military '. Moreover, since defense and aerospace stocks gained considerably even in the days of sequestration, the future of this sector looks bright.
So, defense and aerospace ETFs including iShares US Aerospace & Defense (ITA) , SPDR S&P Aerospace & Defense ETF (XAR) and PowerShares Aerospace & Defense ETF PPA) should get a lift(read: Upbeat Aerospace & Defense Results Lift ETFs ).
Pharma and Healthcare Sitting on the Fence?
Hillary Clinton's tweet raised concerns over the pricing on life-saving drugs in September. Questions over biotech pricing came on the heels of a 5,455% price hike (in about two months) of a drug called Daraprim, used to treat malaria and toxoplasmosis. This gigantic leap in pricing action was taken by a privately held biotech company Turing Pharmaceuticals (read: How Hillary Clinton Crushed Biotech ETFs with One Tweet ).
This makes it clear that pharma ETFs may come under pressure during Clinton's presidency. The above-said comments and tweets may make pharma ETFs edgy. PowerShares Dynamic Pharmaceuticals Portfolio ETF (PJP) may be a victim.
On the other hand, Clinton plans to push Obamacare or the Affordable Care Act higher. Health Care Select Sector SPDR Fund (XLV) may get a boost from the expected surge in healthcare providers and services.XLV has only 39% exposure in the pharma sector while other corners of the healthcare sector make up the rest.
New Regulations on Fracking: Winning or Losing Proposition?
She is expected to embark on new regulations on fracking, the key cause of the U.S. energy sector boom. Clinton proclaimed that she would not back fracking in states or local communities that are against it because of pollution issues.
While this move may go against ETFs like VanEck Vectors Unconventional Oil & Gas ETF (FRAK) , and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) , environmentally friendly ETFs like The SPDR MSCI ACWI Low Carbon Target ETFLOWC or SPDR S&P 500 Fossil Fuel Free ETFSPYX should get a boost (read: Eco-Friendly ETFs to Commemorate World Environment Day ).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.