Regardless of whom takes the White House in this election your income will be affected over the next four years. How it is affected is the million-dollar, or perhaps the trillion-dollar question…
Who controls the branches of government, the Senate and House of Representatives specifically, will impact the degree to which our wallets are tapped. Historically speaking, we’ve been trained to believe that the Republican party is the more fiscally responsible party.
But, that’s not the truth though, as the Democrats have shown to be stewards of a more robust economy over time than the Republicans. So how may the 2020 election impact our wallets and economy?
We’re taking a look at what The President and former Vice President has said during the campaign and what stocks could benefit from the chosen candidate…
The Dreaded 1040…
Trump, leading up to the election promised but never delivered a plan with the exception of a promise to slash taxes for the middle class, a 2.0 version of the 2017 tax cuts. While it did offer some relief for the middle class, the country’s top 20% earners cashed in on 60% of the cuts. The Tax Cuts and Jobs Act, signed into law by President Trump in December 2017, lowered the corporate tax rate to 21 percent from 35.
Illinois-based Deere & Company (NYSE: DE), started in 1837 by blacksmith John Deere, who made farming plows, reported earning $2.15 billion in U.S. income before taxes. It owed no U.S. taxes in 2018 and reported that it was owed $268 million from the government. The company reported global profits of $2.37 billion.
Biden’s plan targets the wealthy earning $400,000 or more including income taxes, capital gains taxes, and payroll taxes. The plan would raise $3.4 trillion but would in fact cost taxpayers $5.4 trillion according to an analysis by The Wharton School at the University of Pennsylvania.
There’s no indication at this time how the difference would be made up. If you’re fortunate enough to be in this income bracket or not, healthcare REITs may be a good place to park some money. National Health Investors (NYSE: NHI) is one that specializes in senior housing and skilled nursing facilities.
The company has paid dividends consistently through the years, with a current yield of 7.87%. Its tenants include some of the country’s best-known operators barely registering any downtick in rent collections during the pandemic. Vaccines and a national mandatory mask mandate may push this stock even further.
A Steady Income…
President Trump promised to create 10 million jobs, though the time frame and details are unclear. Employment had increased by 6.8 million from January 2017 through February 2020. Most of the jobs though were low-paying jobs paying less than $1000 a week.
Republican administrations have always been kind to aerospace and defense companies and Raytheon Technologies Corporation (NASDAQ: RTX) may look a bit undervalued at this time. But, if Trump wins a second term expect a healthy defense budget and plenty of job security in the sector.
Right now anything associated with commercial aerospace may appear risky, but the pandemic won’t last forever. What should help its commercial aerospace business for the time being, is that nearly 55% of Raytheon’s revenue comes from a relatively stable defense and space business.
V.P. Biden plans to throw a lot of money at employment, as much as $400 billion in manufacturing and $300 billion in research and development which he says will create 5 million jobs on top of those lost to coronavirus. Biden plans to “Create millions of good, union jobs rebuilding America’s crumbling infrastructure — from roads and bridges to green spaces and water systems to electricity grids and universal broadband.“
Caterpillar (NYSE: CAT), a Dividend Aristocrat, is one of the largest global-equipment manufacturers. VP Biden has repeatedly said he wants to fix the country’s crumbling infrastructure.
Its second-quarter results were dismal and left no guidance for the remainder of the year, yet recently the stock has seen an upward push, a 20% gain since the last earnings report. Although set back by the coronavirus, CAT is well-positioned to benefit from an infrastructure bill and renewed global investment, if investors can sit tight.
The Future of Obamacare…
The Trump administration has spent a good chunk of time trying to repeal the troubled legislation without any success. It continues to be a Republican target and under attack despite the fact that 55% of Americans hold a favorable opinion of it. The president promised on several occasions to provide a replacement plan but has failed to generate a plan.
Most if not all pharma companies would benefit from a Trump victory primarily because they know they wouldn’t need to compete with a public option. AbbVie Inc. (NYSE: ABBV) makes the world’s best-selling drug. Humira, a biologic, it treats autoimmune diseases such as arthritis, Crohn’s disease, and plaque psoriasis, and accumulated more than $19 billion in 2019.
All politicians and patients agree that drug prices are too high, Trump has even floated the idea of importing drugs to lower the cost. If elected, AbbVie would get another four-year reprieve from political pressure.
Biden aims to limit healthcare premiums to no more than 8.5% of annual income. He proposes a public option for those who can’t afford a private option and lower the Medicare eligibility age to 60 from 65. There is a concern though that this program may damage the employer-sponsored health insurance market.
We see an opportunity for even greater advances for Teledoc (NYSE: TDOC) if Biden wins the election.
He’s looking to expand healthcare through telehealth medicine into rural communities anywhere there is an internet connection.
TDOC leads the world in telehealth and covers more than 450 medical specialties. In addition to that, it’s cheaper than visiting your doctor onsite for the patient, the provider, and insurers.
The Bottom Line
“The key for long-term investors is to remain invested, no matter which political party holds office,” according to Liz Ann Sonders, chief investment strategist at Charles Schwab.
“If someone invested $10,000 in the Dow Jones Industrial Average starting in 1900, but only when Republicans were president, that portfolio would now be worth $99,000. If that same person only invested when Democrats were president, that $10,000 would be worth $430,000. However, if that investor had stayed in the market the entire time, the portfolio would’ve grown to more than $4.2 million”, according to Sonders.
–The BLI Staff