Election Day is five days away. That means the first post-election trading session is just six days away. The list of ETFs that could surge following reelection for President Obama has been unveiled. Predictably, the list included pharmaceuticals and telecommunications funds, among others.
Now, it is time for one final examination of the sector funds that stand a chance of rallying in the wake of a victory by Republican challenger Mitt Romney. Without further ado...
Direxion Daily Financial Bull 3X Shares (FAS) There has already been speculation financial services names are pricing in a Romney win. Then there is the fact that donation numbers do not lie. Wall Street loved President Obama in 2008. Four years later, the Street has sent more than triple the donations to Romney as it has to the President.
Investors should note that the inclusion of the Direxion Daily Financial Bull 3X Shares on this list is not long-term investment advice. FAS and related ETFs are anything but long-term holds. Rather, if Romney pulls off the upset, it would not be surprising to see financials overreact in positive fashion. In that scenario, FAS is an ideal trade for two or three days.
iShares Dow Jones US Medical Devices Index Fund (IHI) Why this consequence, unintended or otherwise, of Obamacare is not getting more press is baffling. The Battelle Technology Partnership Practice released a study that found a tax within Obamacare on medical device makers could lead to the loss of tens of thousands of jobs and billions of dollars of lost economic output. That is bad news for the economy and terrible news for ETFs such as IHI.
The risk to the long IHI/Romney victory trade is that it is unlikely he will be able to overturn Obamacare in his first term, let alone his first 100 days in office. If IHI falls below $66 following the election, the smart thing to do would be wait for another $2 or $3 to come off before getting involved.
Market Vectors Unconventional Oil & Gas ETF (FRAK) FRAK debuted in February and its assets under management total of $18.5 million is fair at best. Some of the air has come out of this ETF in the past month as oil prices and equities have fallen. However, it should be noted that FRAK started to move higher just as it became clear Romney would be able to give President Obama a real run for his money.
Whether he walks the walk if he wins is another story, but Romney has talked the talk regarding increased domestic energy production. That rhetoric alone could be enough to spark FRAK and other equity-based oil ETFs in the days immediately following the election. Assuming Romney wins, of course.
Market Vectors Coal ETF (KOL) Politically speaking, the case of the Market Vectors Coal ETF is an interesting one. Coal's future lies with the metallurgical variety that is craved by emerging markets for steel production. Most metallurgical coal is produced in small western states that are not politically competitive.
Thermal coal,which is used for power generation, is produced in swing states such as Ohio and West Virginia. Coal and KOL have plunged due to slumping natural gas prices. Cheaper and cleaner than coal, natural gas has been increasingly used by electric utilities. That does not mean politicians will not make political hay out of coal production.
Romney is even running ads in coal-rich Pennsylvania, a state a Republican has not won since 1988.
Given President Obama's still vocal commitment to alternative energy, Romney is the safer play for those that are long KOL and its constituents. The ETF is up 10 percent in the past month.
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