Analyst Thoughts

Are Starting To Congeal

It’s time to start singing one of the best summer camp songs of all time, “99 Bottles of Beer”. In actuality, there are only 98 days remaining until the presidential election. It’s only 22 days until the Democratic Convention kicks off in Chicago. As Chicago sang, “The Whole World Is Watching” and they should be, especially given the scenario we witnessed in 1968.

I lived through those days in real-time. I was arrested in the summer of 1968 at the age of 13 protesting the ‘Vietnam War’. The police thought I was older. They asked me for my driver’s license. I didn’t have one so they asked for my Dad’s phone number. I did not know what to expect when he picked me up at 2:00 AM. It’s a good thing that my Dad was a jazz musician at heart. He picked me up and I remember being scared but the look on his face exhibited his overall approval. While he was a bit upset about the overall circumstance, it was obvious he agreed with my position and stance. I did not sleep much that night but did shoot a solid round of golf the next day.

So what can we expect this time around? Bad enough the convention is being held in Chicago but there’s more. What are the protesters going to do? Will the Chicago riots emerge once again? To many, the overall unrest in the Middle East is on their agenda. But this is a “critical” time in United States politics. What is going on in the “smoke-filled” back rooms of the Chicago mob? We’ve been subject to their edicts over recent months. Together with the “fake news” the coronation of Queen Kamala is underway. I don’t think they want anything to take away from their objective but that’s uncertain at this time. It’s going to be an interesting end to summer.

The Analysts Are More Focused

As the United States gears up for the “upcoming” election, many market watchers are evaluating the potential impacts of a “clean” Republican sweep. If that happens, there are several sectors poised to benefit from such an outcome due to anticipated policy changes, regulatory shifts, and economic trends.

For instance, Financials are projected to be the biggest beneficiaries in the event of a Republican sweep. Historically, this sector thrives under Republican administrations due to deregulatory policies and robust economic growth. Specifically, analysts said financials would benefit from "less regulation, stronger nominal GDP, a steeper yield curve, and increased M&A activity. Financials outperformed most following the 2016 election, and second most following the Trump / Biden debate and the assassination attempt,” they added.

Cyclical sectors, particularly industrials and energy, are also expected to perform well. These sectors benefit from basic economic expansions and deregulation. "Industrials benefited in all instances,” analysts said. “Energy underperformed following the 2016 election, but was the top performer following the debate and assassination attempt.”

Materials, alongside energy, stand to gain from reduced regulatory constraints as well. Less regulation in drilling and other environmental restrictions provide a significant boost. Discretionary, on the other hand, was less impacted after the 2016 election.

Trump has advocated for "most favored nations" pricing on pharmaceuticals, which poses a challenge for the Healthcare sector. The tech sector could maintain its stable performance. This industry is "neither economically sensitive nor highly regulated." As such, it may not experience significant disruption or gain from the election results, continuing its trend based on broader market and technological innovations.

Value stocks are anticipated to outperform growth stocks in a “Republican” sweep scenario. Analysts explain that "low P/E stocks led following the Trump election and recent events.” Financials and cyclicals tend to be lower P/E. Usually, low P/E stocks outperformed across groups. High-growth stocks were undifferentiated after the 2016 election and showed underperformance around recent events.

There are still “98 bottles of beer” to fall between now and the election and analysts are often known to change their spots. I guess that they are going to drink a few of those beers between now and then so stay tuned, updates are a certainty.

Yes, the whole world is watching but back in 1968 we only had three major networks following the chaos in Chicago. Today there are many more including the ‘fake news‘ where journalism turns into commentary. All things considered, I’m more interested in the beer. Back in my days of long bus rides “99 Bottle of Beer” was a staple. It was easy to remember the words and the tune was simple. The problem we had was being able to sing the entire song. That’s why the following does just that. See if you can do it. I know from experience that I cannot. Best always.