Election Day is less than two months away and with that in mind, now is an excellent time for investors to consider sector-level implications of two the possible outcomes of this year's presidential election.
Those implications run deeper than simply assuming a Biden-Harris Administration would be bad for fossil fuels stocks, though that's probably a safe bet. Of course, there are some sectors that could get a “Biden bump,” some of which are already among this year's best-performing groups.
Likewise, if President Trump wins reelection, that's not necessarily a death knell for some of the sectors and industries thought to perform well when Democrats are in the White House. The last two years of price action in clean energy exchange-traded funds proves as much.
Here are three to sector ETFs to consider if former Vice President Joe Biden becomes President Joe Biden.
Consumer Discretionary Select Sector SPDR (XLY)
Or any ETF heavy on Amazon (NASDAQ:AMZN) for that matter, but we'll highlight the Consumer Discretionary Select Sector SPDR (NYSE:XLY) because it's the largest ETF tracking this sector and it has a 22.76% weight to the e-commerce giant, or more than 1,000 basis points above the weight assigned to its second-largest holding.
Here's the bottom line on XLY, assuming Biden wins: There's a perception that Trump is overtly hostile to Amazon by way of his stance on immigration and that stance would, obviously, change with Biden in the White House. That said, Amazon performed well when President Obama was in office and since Trump arrived in the White House, so investors may not want to depart XLY if Biden loses.
Communication Services Select Sector SPDR (XLC)
Trump's Amazon hostilities likely pale in comparison to those he aims at Alphabet (NASDAQ:GOOG) and Facebook (NASDAQ:FB), two stocks that combine for more than 45% of the Consumer Discretionary Select Sector SPDR's roster (NYSE:XLC). XLC as a Biden play is where his running mate, Sen. Kamala Harris (D-CA) could come into play.
Harris “cultivated relationships with the tech industry during her past tenure as district attorney of San Francisco and attorney general in California,” according to S&P Global Market Intelligence. “The vice presidential contender has also sided with tech firms on issues such as net neutrality and taken a stance far less severe than Sen. Elizabeth Warren's call to break up Big Tech.”
Technology Select Sector SPDR (XLK)
Fortunately for technology investors, the Biden-Harris campaign isn't making technology breakups a centerpiece of their platform and that's a plus for the Technology Select Sector SPDR (NYSE:XLK) and rival technology sector ETFs.
Additionally, a Biden Administration is likely to take a softer approach to dealing with China, which should be music to the ears of a slew of XLK components, including Apple (NASDAQ:AAPL).