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Politics and the Markets

publication date: Mar 1, 2016
 | 
author/source: Brian Nelson, CFA

Image Source: DonkeyHotey

By Brian Nelson, CFA

I personally cannot believe how long this election cycle has been.

Have we really had 10 Republican debates? It seems like the town halls are adding up, too? If it wasn’t for Apple’s (AAPL) run-in with the FBI, “Most of us woke up to the news… (Feb 18),” one might have not known that former producer of McAfee anti-virus software John McAfee may run as the Libertarian Party candidate, and what about Michael Bloomberg? Could the latter play spoiler to Donald Trump’s hopes for the oval office if he divides the Republican vote? Or will traditional Republicans that prefer anyone else but “the Donald” donate to Hillary Clinton’s candidacy in the general election, should she triumph over the first democratic socialist of the “millennial era,” Bernie Sanders. Will we see Rand or Ron Paul run, too? The future of America hangs in the balance.

At the very least, these past many months have been entertaining, if not annoying and sometimes frustrating for the average, everyday voter. It seems given the popularity of Mr. Trump and Senator Sanders that America certainly wants change – but isn’t that what the country was served up under President Barack Obama? The election coverage is enough to make the heads of both Republicans and Democratics spin! Is Mr. Trump really feuding with the pope? Did the real estate guru really tell Governor Chris Christy to “go home” right after his endorsement or was that the media taking things out of context? By the way, did you know the average contribution for the Bernie Sanders campaign is $27 – have we heard that a couple times? What about Jeb Bush suspending his candidacy, despite help from the respectful Bush dynasty, even the 41st President himself and his lovely wife -- and how did such a move end up only fueling greater gains for Trump in Nevada? Mr. Trump continues to “win,” and why hasn’t he and Megyn Kelly made up yet?

The mudslinging during this election cycle has been tremendous.

What’s the latest on Hillary’s emails, and why is it important that she release her previous speeches made to Wall Street? Why is former Republican nominee Mitt Romney now bashing another Republican candidate -- and does anybody truly want to see Trump’s tax returns besides the IRS? What is there to gain from a Romney-Trump brawl? Even Marco Rubio is now going after Trump after falling behind in the polls in his home state of Florida. Watching him and Senator Cruz tag team Mr. Trump on the podium has been interesting. How can we forget all the bad news at the Cruz camp? Lost credibility in the Iowa caucus after some potentially shady activity, and recently he fired his chief campaign organizer on account of false statements about Senator Rubio. All three top Republican candidates are now calling each other liars, from what I can gather, and sadly Ben Carson, who continues to be very respectful to all, is getting lost in all of the back-and-forth, he-said- she-said rhetoric. Interesting that Mr. Carson appeared shocked to find how most Americans are treating each other during the political free-for-all that we call the election cycle. John Kasich continues to be a believer, and why not? He’s not doing that poorly, all things considered.

We’ll get a feel for how the delegates shake out on Super Tuesday, March 1, but one thing is clear: the impact of the election of 2016 will be disruptive with wide-ranging implications on several key industries: defense contractors via the trajectory of defense spending, fast-food restaurants and big box retailers via minimum-wage legislation and arguably immigration reform, biotech via wide-spread opposition to existing exorbitant drug prices, healthcare via the pledges of several candidates to repeal Obamacare, insurance given the call for increasing competition between states, and implications on consumer spending given each candidate’s proposed tax plans – which nobody truly understands. I’m sure I’m leaving a few things out, but you get my point: The markets can’t ignore the election cycle of 2016 – and we know many of you are already tired of it.

I hope you enjoy this edition of the Dividend Growth Newsletter! And please pay attention to the Dividend Cushion ratios of firms you own – it can save you a lot of heartache and your portfolio a lot of losses! If you’re not using the Dividend Cushion ratio, you’re not taking advantage of your membership at all.

The Dividend Growth Newsletter will be released March 1, as originally scheduled.

Aerospace & Defense - Prime: BA, FLIR, GD, LLL, LMT, NOC, RTN

Biotechnology: ALXN, ARNA, BIIB, BMRN, CELG, IRWD, REGN, TECH

Restaurants - Fast Food & Coffee/Snack: ARCO, DPZ, DNKN, JACK, JMBA, KKD, MCD, NATH, PZZA, SONC, SBUX, WEN, YUM

Pharmaceuticals - Big: ABBV, ABT, AMGN, AZN, BMY, GSK, LLY, MRK, NVO, NVS, PFE, SNY

Pharmaceuticals: AGN, ENDP, GILD, MYL, RDY, TEVA, VRX, VRTX, ZTS


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