- Stocks rose when it looked likely that former Vice President Joe Biden would win the presidency and Republicans would retain the Senate.
- Raymond James' investment chief Larry Adam told Business Insider why a Biden-McConnell combo would be a positive for markets, and highlighted four sectors he's bullish on for the coming years.
- Visit Business Insider's homepage for more stories.
President Donald Trump has often asserted that he's Wall Street's preferred candidate.
"Your 401k's will crash with Biden," he tweeted on one occasion.
"If anyone but me takes over in 2020 (I know the competition very well), there will be a market Crash the likes of which has not been seen before!" he tweeted on another.
Yet, when it became clear that former Vice President Joe Biden was on track to win the presidency — with a Republican-controlled Senate — markets skyrocketed.
Led by growth stocks, the S&P 500 has gained more than 4.5% since Wednesday, and the Nasdaq has surged more than 6.5%.
For Raymond James' Chief Investment Officer Larry Adam, this was no surprise.
A Biden win with a split Congress has always been the market's preferred outcome, he told Business Insider, despite the likelihood of a smaller stimulus package than would have been passed under a Democratic president and Congress.
Of course this is due in large part to the fact that a Republican Senate will block corporate or individual tax hikes and regulation measures proposed by Democrats.
But some in the financial community are expressing relief about the steadier tone of a Biden presidency relative to Trump, combined with a split Congress.
"Finally we can stop fretting about politics and start focusing on business and your money again," CNBC host Jim Cramer said on his show, Mad Money, Wednesday afternoon. "Because a divided Congress and a blue White House, well that's called Nirvana for growth stocks."
Adam echoed this sentiment, especially when it comes to trade policy.
"It takes off some of the trade rhetoric with Biden as president and that helps a lot of the multinationals," Adam said. "It weakens the dollar as global growth is probably a bit more positive, so that helps those multinationals."
Beyond the difference in tone between Biden and Trump, Adam said Biden's record of working with Senate Majority Leader Mitch McConnell will be a steadying force.
"If you look back through history, Mitch McConnell and Biden have worked together," Adam said. "They've been able to negotiate a couple deals over their tenure down in Washington, especially when Biden was vice president with some of those issues like the fiscal cliff."
Further, Adam pointed to McConnell's apparent eagerness to get a stimulus deal done before the end of the year — one that includes funds for state and local governments, something on Democrats' wish list.
4 sectors to buy into now
But regardless of who ends up in power, Adam said that he doesn't recommend investing based off those in office.
He cited the bullishness after the election in 2016 around market sectors like financials and energy, and bearishness around tech stocks. The former two have underperformed and the latter has vastly outperformed.
Instead, he said to let factors like economic indicators, the actions of the Federal Reserve, and underlying societal and market trends guide investing strategy.
Considering these things, Adam said he likes four sectors in particular. One is technology.
"I think tech continues to be a beneficiary of COVID-19, as people want to do more and more from their homes, building out their offices. ANd I think valuations, the one thing people misplace there, if you look at it on an absolute basis, it's the most expensive, but if you look on a relative basis, it's not expensive," he said.
He added: "Keep in mind that tech beats its earnings by the largest magnitude, 7% or 8%. So when you factor that in quarter after quarter, I think it's attractive fundamentally and thematically."
Investors looking for exposure to the technology sector might consider the Technology Select Sector SPDR Fund (XLK).
Second, he said healthcare is poised to see gains, citing "attractive" valuations and strong earnings growth, as well as trends like aging demographics and the pandemic.
The Health Care Select Sector SPDR Fund (XLV) offers exposure to the healthcare sector.
Third, Adam said he likes the communication services sector for similar reasons to technology.
"It's the broadband rollout, it's all about content, it's a beneficiary from COVID-19 — people staying at home — and I think that's likely to continue," he said. "To me, valuations remain attractive in that space as well."
The Vanguard Communication Services Index Fund (VOX) offers exposure to the communication services sector.
Finally, Adam said he's bullish on the consumer discretionary sector, particularly in ecommerce and home improvement.
"Those are two areas that have benefitted from what's happened with this environment," he said. "And going forward I think that transition to ecommerce is likely to continue, and that should continue to drive visibility of earnings going forward."
Those seeking exposure to this sector might consider the Vanguard Consumer Discretionary ETF (VCR).
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