Editor’s Note: From now until the election, we’re looking closely at what a Barack Obama re-election vs. a Mitt Romney presidential win would mean for investors.
No matter who wins — and, in fact, directly BECAUSE OF who wins — massive and unprecedented opportunities are ready to start springing to life long before Inauguration Day.
Last week Sean Brodrick examined “3 Reasons an Obama Re-Election Could Be Good for Stocks.” And earlier this week, Tony Sagami provided some insight into “How Would You Fare Under Romney’s Tax Plan?”
Today Sean is giving you a closer look at five of Obama’s goals for his second term that are designed to boost the economy. And for investors who get on board early, the success of these initiatives could dramatically boost your profits along the way.
It’s anyone’s guess who will win the election. But here’s one thing I do know: Stocks have done well in the past four years. And if President Barack Obama is re-elected, there will be even-more big winners in the stock market.
America has added roughly $7.3 trillion in market capitalization since President Obama took office in January 2009. In fact, he’s one of just five presidents since 1900 who saw at least a 50% jump in the stock market during their first three years in office. (The others are Coolidge, FDR, Eisenhower and Clinton.)
Historically speaking, election years are good for stocks, as you can see in the chart below. The green line shows stock performance when a sitting president wins re-election; the blue line represents calendar year 2012.
This chart of the election-year pattern in the Dow Jones Industrials since 1904 shows an average gain of nearly 8%. To be sure, the Dow had recently racked up a gain of more than 9%.
But also notice that a nice part of that gain usually comes in November and December. Combine that with the Federal Reserve’s fire hose of free money in the form of quantitative easing, and I think the best is yet to come.
However, this doesn’t mean we’re out of the woods. Many stocks are reporting disappointing earnings, and we still have to see Congress and the president deal with the “fiscal cliff.”
But I think the problems are surmountable.
How do you think President Obama would like to steer the economy in a potential second term?
Well, here’s what we know …
Obama called for the nation to rally around “a real, achievable plan” to deal with our economic challenges.
As part of that plan, he has outlined specific goals. They include:
Goal #1: Cut Net Oil Imports in Half by 2020.
That’s a tall order, but America is making progress. The U.S. imported 7.5 million barrels of oil per day through the middle of October, 44% less than the high of 13.6 million barrels per day in November 2005.
What’s more, the Energy Department noted that U.S. oil production has already surged to the highest weekly production of domestic crude oil since late 1996, more than 15 years ago.
In fact, U.S. crude production is expected to rise 12% this year and 8% in 2013, when it will hit the highest level since 1993, according to government figures.
America met 83% of its energy needs in the first six months of the year. If the trend continues through 2012, it will be the highest level of self-sufficiency since 1991.
So what does this mean for the economy?
In a report, Citigroup suggested that resurgent U.S. energy supplies could lead to a “re-industrialization” of America — one that could add as many as 3.6 million jobs by 2020 and increase the gross domestic product by as much as 3%.
We’ll see what happens.
One important point — the energy market is global, and it’s likely that U.S. producers and refiners will export the results of their rising production to customers around the world.
So, although it was a hot topic at this week’s debate, don’t expect prices at the gas pump to go down anytime soon.
Also, President Obama has promised for three years to end oil industry subsidies. Basically, he wants to remove the nearly $25 billion in tax breaks and subsidies that are given to oil companies.
He has made no progress, and I don’t think he’ll achieve that goal in a second term, either. Could his lack of progress have anything to do with oil companies lobbying Congress? Hmm …
Of course, no discussion about Obama and energy is complete without looking back at his rejection of the “Keystone XL” deal. Earlier this year, President Obama blocked TransCanada’s proposed $7.6 billion Keystone Pipeline, which would ship oil from Cushing, Okla., 435 miles to the Gulf Coast.
Many in the energy business don’t like him for it. Consumers may differ, because that oil pumped through the Keystone would be exported — meaning there’s less oil to refine here in the U.S.
Still, the oil will be exported one way or another, and I’m in favor of the Keystone Pipeline.
I think President Obama will OK the Keystone project in his second term, if for no other reason than it means more jobs. (Though likely not as many as pipeline proponents like to promise.)
Investing Opportunity: There will be many oil industry winners in a second Obama term.
Energy is well-represented in my list of 13 Obama Profit Bonanzas that I’m preparing to release on Nov. 7 if he wins re-election. Find out how you can get access to a full list of presidential profit-doublers immediately after the election — click here for the full details now!
Goal #2: Cut the Growth of College Tuition in Half over 10 Years.
This overarching goal actually has a couple other parts to it.
President Obama also sets a goal of training 2 million workers for jobs. And his third education goal is to recruit 100,000 math and science teachers over the next 10 years.
Tuition has grown nearly five times faster than inflation since 1985, and cutting soaring tuition costs will be tough. Experts attribute skyrocketing tuition to dramatic budget cuts from state legislatures over the past 30 years. Also, college presidents and administrators continue to get six-figure raises even as students get hit with double-digit tuition hikes.
Cutting tuition in half still means it would increase 2.5 times as fast as inflation. That may be achievable, even if it’s not as much of a tuition cut as we’d like.
Rising tuition is mainly a Democratic concern. The Republican response has been that the government should stop subsidizing higher costs by stopping subsidies of student loans.
The logic goes that, if students can’t afford to pay high tuitions, colleges will have to lower those costs. For a while this year, Republicans blocked extension of low-cost student loans, but finally gave in when it was part of the transportation bill.
The president could push for a bill to cap the growth of federal student loans, similar to how Medicare and Medicaid costs are contained, but I think that’s unlikely. He could subsidize loans more.
Investing Opportunity: An Obama victory would probably be bullish for companies in the education field — and it would be a plus for students who need loans.
Goal #3: 600,000 Jobs in Natural Gas Development by the End of the Decade.
The White House has opened millions of new acres for oil and gas exploration, covering more than 75% of America’s potential offshore oil and gas resources. Some of this is oil; a lot is natural gas.
Still, opening up land is one thing. Utilizing it is another.
The total number of acres of public land under lease has been in decline since the start of Obama’s administration, along with applications for onshore drilling permits.
To be fair, acres under lease also dropped during the Bush administration. But the fact is, President Obama has to come up with ways to incentivize companies to drill on public land, if that’s his goal.
The oil and gas industry will say they’ve had to jump through extra hoops to get access to resources. This has a lot to do with the Deepwater Horizon disaster in the Gulf of Mexico, which no one wants to see repeated.
So these same oil and gas companies that are getting nearly $25 billion in tax breaks and subsidies are saying that regulations are too strict?
I think jobs in the natural gas field will be dictated by the price of natural gas itself. If it’s economical to go after the gas, we’ll see more drilling and more jobs; if nat-gas prices remain at rock bottom, those jobs won’t be there.
Investing Opportunity: The good news is I think that nat-gas is going higher, so President Obama’s chance of achieving this goal is better than average. And that means many gas companies will likely do well in a second Obama term.
Goal #4: Create 1 Million New Manufacturing Jobs by the End of 2016.
“We can create a million new manufacturing jobs in the next four years,” President Obama told the Democratic National Convention.
Manufacturing has been one of the positive surprises of the recovery, with year-over-year job creation running at roughly 215,000 positions since 2011. Even if the economy doesn’t accelerate much more, we could see another million new jobs in manufacturing.
And President Obama could help this along by offering tax breaks like full expensing for capital investments.
Investing Opportunity: U.S. manufacturers could become big winners.
Goal #5: Double Exports.
“We can help big factories and small businesses double their exports,” President Obama said at the DNC.
This sounds like a big goal, but it’s actually doable. We know because it’s happened before.
The decade from 2000 to 2010 saw a doubling of exports, as soaring global growth pushed up foreign demand for U.S. products. Rising exports boost manufacturing jobs, so this goes hand-in-hand with the previous goal.
The more the dollar depreciates, the more attractive the “made in America” label looks to foreign buyers.
Investing Opportunity: Improving infrastructure — roads, bridges, seaports and airports — will also boost exports. A new paper from the National Bureau of Economic Research shows that production-speed gains could significantly improve the competitiveness of exports.
But exports will really depend on foreign customers, which means the other economies of the world. President Obama doesn’t have much control over whether or not Europe gets its act together.
Plenty of Profit No Matter Who Wins
I’m not that worried about who wins the election. We can make profits no matter who is in the office. Right now I’m getting more bullish on the economy. Although that doesn’t guarantee higher stock prices, it doesn’t hurt, either.
And while I can give you plenty of reasons why I am not happy with President Obama, I will concede that he’s been good for stock prices … and would continue to be, going into a potential second term.
So if you’re worried about what’s going to happen to stock prices, don’t. There will be plenty of profits to go around.
However, it is true that some stocks will do better than others depending on who is in the Oval Office. I’ve only scratched the surface here — I haven’t even gotten to how President Obama should help select healthcare stocks, construction, infrastructure, renewable energy and discount retailers.
And I can make a case for how a President Romney would be good for select makers of medical devices, financial services companies, defense contractors and more.
There is opportunity everywhere. It’s simply a matter of being open and available to seizing it.
The fact is, no matter who wins, the election results should give us a stock-pickers’ market — and a very lucrative one at that. You just have to make the right trades.
Yours for trading profits,
P.S. My colleague Tony Sagami and I have identified 12 Romney Windfall Stocks and 13 Obama Profit Bonanzas, so that you know exactly where to invest your wealth based specifically on who’s in the White House for the next four years.
This post-election profit guide is filled with a presidential-focused batch of potential money-doublers designed for either a Romney or an Obama win. You don’t need to wait till the elections are over — you’ll be covered either way when you reserve your copy today!