Clinton Gets Past FBI Investigation: ETFs In Focus

Putting all speculation to rest, the FBI absolved Democratic candidate Hillary Clinton right ahead of the election, stating that her usage of private e-mail servers did not amount to misconduct. The issue hit Clinton’s popularity lately and pushed Republican candidate Donald Trump a step forward, tightening the race to the White House.

However, FBI’s clean sheet turned in favor of Clinton again with poll tallies of 45.3% to 43% for Trump, as per the national polling average published on nytimes. Meanwhile, most of Clinton-friendly investments gained, if we rule out the general election-induced phobia and uncertainty.

Last week's U.S. Jobs data came in favor of the Democrats, as well. October job growth of 161K, fell short of analysts’ expectation of 170-175K and September’s upwardly revised addition of 191K, but a 4.9% unemployment rate was the second-lowest in 40 years for the month before a presidential election. Wage growth of 0.4% (2.8% year over year) was also there to accompany the optimistic job report.

Below we highlight a few investing areas that should be closely watched the day before the election (read: Trump or Clinton: These ETFs to Face Same Fate).

U.S. Stocks

If Clinton wins, the S&P 500 will likely snap its nine-day losing stretch and stage a relief-rally. But along with many analysts, we also believe that Clinton’s win is largely priced in investors’ sentiment and so there will be limited upside in the market. Barclays (LON:BARC) Plc believes that the S&P 500 Index will likely see a 3% gain. This puts SPDR S&P 500 ETF (NYSE:SPY) (AX:SPY) in focus.

Mexican Peso

The Mexican peso popped about 2.2% – the most in about a month – as the FBI confirmed that Clinton’s act was not a crime. Mexico peso is a Trump-unfriendly investment due to his plans of building a wall along the border as part of his immigration strategy and making Mexico pay for it. Thus, higher chances of Clinton winning should push iShares MSCI Mexico Capped EWW higher.

Bullion

Though SPDR Gold Shares (NYSE:GLD) (V:GLD) added about 0.07% gains on November 4 on safe haven demand, Clinton’s win may put pressure on this investment as greenback should rise and stocks should be in the positive territory. Both conditions normally go against bullion.

Healthcare

Hillary Clinton’s tweet on concerns over aggressive price increases on life-saving drugs has gained a lot of attention. Since then, her constant moves against price-gouging in the healthcare sector has kept this issue in her scope. Health Care Select Sector SPDR ETF (NYSE:XLV) XLV will thus be closely watched (read: How Hillary Clinton Crushed Biotech ETFs with One Tweet).

Infrastructure

Clinton intends to boost infrastructure spending giving an edge to utility ETFs like PowerShares S&P SmallCap Utilities Portfolio PSCE. And if continued uncertainty keeps bond yields at check, it would be an added advantage (read: Third Presidential Debate Puts These ETFs in Focus).

Defense

Clinton has always been seen as a supporter of ‘a strong U.S. military.’ Moreover, since defense and aerospace stocks gained considerably in the democratic rule even in the days of sequestration, the future of this sector looks bright. So, defense and aerospace ETFs including iShares US Aerospace & Defense (HN:ITA) should get a lift.

Consumer

Clinton seeks to hike the minimum wage from $7.25 to roughly $15 per hour. This will hit several consumer discretionary ETFs. The restaurant sector is a great example, as it employs many such lower-income workers. On the wage hike issue, the ex-CEO of McDonalds (NYSE: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.

As a result, Restaurant ETF BITE) will likely be hurt by the implementation of minimum wage. While consumer staples ETFs like Vanguard Consumer Staples ETF VDC appear to be benefitting 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.

Banks

Clinton seeks to restrain extreme risk-taking tendencies among big financial institutions and curb risks lying underneath the shadow banking system. She is in favor of levying a tax only on high-frequency traders who terminate a lot of orders. These might hurt banking stocks and ETFs like PowerShares KBW Bank ETF KBWB.

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