There are events that present opportunities through chaos and the US election – as Brexit was – appears to be one. During these times as the sands are shifting I find it prudent to attempt to handicap the situation identifying strengths and weaknesses primarily using my portfolio as a lens. Many questions currently have no answers and some stock gains appear to be based on assumptions more than facts. I do reserve the right to modify my thoughts as more data is obtained.
REITs have generally taken a beating primarily on interest rate fears. but the same could be said for Telecoms and Utilities. Telecoms appear to have been spared due to M&A activity.
Financials appear to be a tale of diverging paths. Pundits are bullish on the big banks but not so much on the little guys. My guess is M&A will slow among the small banks as Dodd-Frank is tweaked but will accelerate as the reality of profitability through synergy is identified. Multinational banks will continue to have to deal with Basel III to remain competitive globally tempering some of potential gains.
Healthcare is a wildcard. To repeal a dysfunctional new scheme to implement an old dysfunctional scheme without morphing it into a newly dysfunctional scheme is ludicrous and where this sector’s profits will be found (until Congress gets wise).
Discretionary will depend on the economy – is the new plan recessionary?
And Mexico? Strangely silent have been F, UTX, KO, DE and a host of others with operations there. Then there is the NAFTA treaty which requires Senate action to modify. It’s difficult to see many California or Texas senators supporting an action that would raise unemployment and reduce tax receipts by shuttering logistics centers.
Basically I see no immediate strategic portfolio change but additional diligence will be required. A possible watch list might include UMBF, WBS and ONB for exposure to Health Spending Accounts (HSAs); KSU (Mexican trade); and KOF. Other then the peso valuation and the ADR trade, I know of no other US exposure for KOF (Coca-Cola Femsa).
And how are you surviving?