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Democrats Likely to Win 2016 Election: ETFs to Benefit

According to several researchers and data points, the Democratic front-runner Hillary Clinton is leading the 2016 presidential race, edging past Donald Trump. This is especially true as the chance of the Democratic candidate winning increased to 72% from 64% on March 1, as per the PredictWise. In contrast, the winning probability of the Republicans dropped to 28% from 36% on March 1. The NPR's ratings show Clinton having an electoral advantage over Donald Trump in the general elections.
 
Also, Wall Street is betting on the Democrats for the first time since 2008, indicating their prospects of winning in November. Clinton gathered almost 70 cents of every $1 spent in the presidential race by employees of the six biggest U.S. banks in the first quarter, according to data compiled by Bloomberg Government based on Federal Election Commission reports (read: Trump, Clinton Race Ahead: ETFs in Contest).

If the Democrats win and move into the White House as per the forecasts, it will prove beneficial for both the stock market and the economy. This is because the stock market has been bullish over the past seven years after President Barack Obama took office in January 2009. The S&P 500 climbed from record lows of 666 in March 2009 to an all-time high of 2,134 in May 2015. Additionally, the economy has largely emerged from the impact of the financial crisis and the Great Recession, growing at an annual rate of 2.91% in 2015 from -0.92% in 2008.

Further, according to the U.S. equity strategist at New York-based S&P Capital IQ, the S&P 500 has averaged a 9.7% gain under Democratic presidencies since 1945 versus a gain of 6.7% under the Republicans. In particular, the three sectors will be the major beneficiaries of the Democrat victory and investors can easily tap them with ETFs:

Healthcare

Hillary Clinton is a huge supporter of the Affordable Care Act and promises to expand it further. She aims to cut out-of-pocket costs for prescription drugs, increase government regulations and expand patient coverage. The expansion of Obamacare will benefit several segments of healthcare such as managed care facilities, hospitals, insurance providers, and medical technology companies as more insured Americans would be able to afford medicines pushing revenues higher, and leading to greater profits. So, Americans expecting Clinton’s victory can consider the broad healthcare ETFs like Health Care Select Sector SPDR Fund (XLV), First Trust Health Care AlphaDEX Fund (FXH) and iShares U.S. Healthcare ETF (IYH). Each of these funds has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating (read: Healthcare Q1 Earnings Look Solid: ETFs to Benefit).
 
Alternative Energy

Alternative energy space has been on the forefront of the Democratic presidency. If Democrats rule the White House again, the stocks and ETFs in the space will get a boost. Further, Clinton is looking to boost solar capacity by as much as seven times (i.e. more than half a billion panels of installations) by the end of her first hypothetical four-year term in 2021 and generate a third of the nation’s electricity through renewable energy by 2027. While there are several options to play the expected rally in the space through ETFs, namely First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) and Guggenheim Solar ETF (TAN) that appear lucrative with a Zacks Rank of 3 or ‘Hold’ rating (read: Make Your Portfolio Eco-Friendly: ETFs for Earth Day).
 
Consumer Staples

Consumer staples will also benefit as Clinton has proposed an increase in the minimum wage for the lower-income strata from the current $7.25 an hour to $12 an hour over the next five years. This would lead to higher spending on necessities, pushing consumer staples’ stocks higher. Investors seeking to play on the sector could focus on Vanguard Consumer Staples ETF (VDC), Consumer Staples Select Sector SPDR Fund (XLP) and PowerShares DWA Consumer Staples Momentum Portfolio (PSL). Each of these has a Zacks ETF Rank of 3.
 
Apart from these sectors, women-run companies might see a huge rally in their share prices as Hilary Clinton will be the first female to take office in the U.S. To tap this upcoming trend , investors’ could pick ETFs like Barclays Women in Leadership ETN (WIL) and SPDR SSGA Gender Diversity Index ETF (SHE) (read: Women Leaders ETFs Head to Head: WIL vs. SHE).
 
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SPDR-HLTH CR (XLV): ETF Research Reports
 
FT-HEALTH CARE (FXH): ETF Research Reports
 
NASDAQ-CL EDG G (QCLN): ETF Research Reports
 
GUGG-SOLAR (TAN): ETF Research Reports
 
VIPERS-CONS STA (VDC): ETF Research Reports
 
SPDR-CONS STPL (XLP): ETF Research Reports
 
PWRSH-DW CON ST (PSL): ETF Research Reports
 
SPDR-SSGA GD (SHE): ETF Research Reports
 
BARCLY-WOMEN IL (WIL): ETF Research Reports
 
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