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Global Markets, I Present to you President Obama; Now What?

Posted on | November 5, 2008 Time: 7:12 am |

Well, history has been made. Barack Obama has taken a staggering 338 electoral votes, and has won the Presidency by what, in political metrics, is an all-out landslide. Just because I’m not 100% sure I’d revealed my hand already, I will say that I fully believe we’ve elected the right man for the most important job in the world.

The Appetizer Cake Is Already Baked In…

Markets have likely priced in the majority of today’s result; the Democrats now control at least 55 seats in the Senate as well as the White House. All the fast tracks and H.O.V. lanes will soon be opened for whatever programs and legislation our government leaders wish to enact.

While the devil’s advocate in me (a welcome voice for any investor) says that fewer checks & balances (under a Democratic legislature and Administration) is not a good thing, a bigger, more visceral part of me remains utterly frustrated by the actions (or lack thereof) over the 6 weeks, ever since the original incarnation of the Paulson Plan met the world’s largest dog & pony show.

Ahead is the Only Direction that Matters

Ready or not, the Obama train is heading out of the station, so it’s time to start analyzing the changes within sectors, industries, and the broad U.S. markets we can expect to see. There was a good rundown posted on Bloomberg this morning; below are the highlights:

Industries at risk for higher taxes, growth limitations

Integrated Oil companies - probably safe in the short term, at risk in the medium-term for windfall taxes, fewer tax breaks. Offshore production plans in the U.S. could be stalled or scrapped altogether.

Energy E&P companies - Offshore drilling risks, increased funding for alternative energy production

Big Pharma, Biotech - Tougher negotiations for lower drug prices via Medicare, possible competition with lower-priced drugs from Canada.

Airlines - Higher Labor Costs

Leisure, other labor-intensive industries - Higher Labor Costs, easier path to collective-bargaining agreements for workers.

Media - Obama has expressed a desire to open up local markets and restrict the “cornering” of local markets by big media conglomerates. We can also expect fewer mergers as antitrust policies will be tougher under Obama.

Industries that could see tailwinds

Autos - Obama has promised to “fast-track” money to the Big Autos - $25 billion was appropriated in late September but has yet to be distributed. In previous statements Obama has expressed desire to allocate $150 billion over 10 years to fund alternative energy and hybrid cars.

Alternative Energy - Solar, Wind, Natural Gas should all see growth via tax credits & other incentives, as well as increased levels of private and government funding. The possible institution of a carbon cap & trade system would really catapult this group, but don’t expect to see anything for a couple of years.

Industrial equipment & service providers - Obama will likely allocate capital towards infrastructure improvement projects like roads and bridges. Caterpillar was mentioned in the Bloomberg article as a particular beneficiary.

Technology - Obama generally wants to promote higher R&D funding, net-neutrality. A recent survey of tech executives found that over 60% felt Obama would be better choice for technology development.

Ryan Barnes

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Category: Broad Markets, Drilling & Oil Services, Pharma, Sector Study, Solar, Tech Services, Technology
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