How Obama Will Affect Your Portfolio

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Barack Obama was elected the next president of the United States of America on Tuesday night, but Wall Street isn't finished voting yet. Following the election, the market experienced its worst two-day drop in history, with the Dow losing 929.49 points, or 9.6%. Investors seem to be having a presidential hangover. This may be shocking to some, but our Fool Poll revealed that John McCain was slightly favored in the eyes of investors.

It's a time for change
Regardless of how investors choose to react to the news, President-elect Obama is ready to take his post for the next four years come January. And the Fool is here to give you the scoop on just what he will bring to the table and how it all might affect your portfolio.

Of course, the global economic crisis continues to sit front and center. With companies such as American Express (NYSE: AXP  ) and even Goldman Sachs (NYSE: GS  ) trimming their workforce, we'll address Obama's plan to action regarding unemployment that has now surged to a 14-year high of 6.5%. We'll also dig deep into the mortgage industry and preview the changes to come for companies such as Bank of America (NYSE: BAC  ) .

Economic policy changes don't stop short at our borders. We'll look at Obama's view of interrelations between countries such as China, the U.S., Brazil, and Australia, and how companies such as Rio Tinto fit in.

Life goes on
Economic policy is at the top of everyone's mind, but there's a breadth of other topics that will play a role in your portfolio. How will Obama's war plan affect the defense sector, and the likes of General Dynamics and Boeing (NYSE: BA  ) ? With baby boomers growing older, what does Obama's health-care plan mean for Pfizer or Merck (NYSE: MRK  ) ? And what kind of influence will our new leader have on technological advancement at companies such as Google (Nasdaq: GOOG  ) or Research In Motion (Nasdaq: RIMM  ) ? We'll walk you through each important issue and explain how you, the investor, will be affected.

Get to know your new president
Having a new leader at the helm is an exciting time, but as we've already witnessed, it also results in both anxiety and opportunity for investors. Check out what's in store for our nation during the next four years and what it means for your portfolio.

Pfizer and Bank of America are Motley Fool Income Investor recommendations. Pfizer, and American Express are Inside Value recommendations. Google is a Rule Breakers selection. The Fool owns shares of Pfizer and American Express. Try any of our Foolish newsletter services free for 30 days.

Jim Mueller doesn't have a position in any company mentioned. The Fool's disclosure policy is air-tight.

Read/Post Comments (21) | Recommend This Article (45)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2008, at 5:39 PM, harrymax wrote:

    I think that the Presidency of Barach Obama bodes well for this country. As Roosevelt said, and Krugman reiterated today, unchecked self interest isn't just bad morally bad, it is bad for the economy.

    This country cannot really know how far we have come until it is calculated how far we have slipped. The stock market needs to be about value again, and not just about making a quick buck.

    I am looking for value in companies that isn't offset by horrendous undisclosed costs. Growing an economy does not have to be about sacrificing our children's futures, but can be about spectacular products and services that uplift this country. True value and hard work are what this country is about.

  • Report this Comment On November 07, 2008, at 6:41 PM, TJSexton01 wrote:

    Dear Mr. Mueller:

    This is technically correct and technically very biased reporting. The inference here is that the election of Barack Obama precipitated the worst drop in the history of the Dow (I use the word ‘inference’ but really it’s not inferred; it’s stated). Yes the two day drop was “…its worst…”, but not by much. Pick a couple of days in the period of 1 Oct through 10 Oct and we both know that that they will lag the last 2 days by less than a percentage point. Was that Barack Obama’s fault also?

    The election is over and I have had my fill of lies, half-truths and Republican/Democratic spin. What I would ask is that you give the news and analysis but TRY to keep it objective; keep your politics to yourself and give me the economics.

    Thank you

    Tom Sexton

  • Report this Comment On November 07, 2008, at 8:14 PM, TMFFischer wrote:

    It should be pointed out that the S&P 500 gained a record 18% in the week or so before the Nov. 4 election. And markets knew the odds favored Obama during this whole time. Nobody really knows why the market fell on Wednesday and Thursday (bad economic data would be my first bet), but if it had anything do with Obama, you'd also have to credit the 18% advance to Obama, and call it "buying on the rumor of the election, selling on the news." Your article overall has value, for the links and thoughts therein provided (I'm sure; although I haven't read them yet), but the opening paragraph was an unfortunate start -- at the very least from an analytical standpoint. Be more thoughtful next time!

  • Report this Comment On November 08, 2008, at 4:21 AM, Sinfest wrote:

    The Motley Fool should focus on evaluating companies and suggesting stock ideas and keep its amateurish macro-economic and political drivel to itself.

    I don't really mind political bias as long as the bias is well grounded logically, but the MF has become so demented and irrational in its attacks on progressive ideas that it even abandons its own philosophy to do so.

    For example, MF always says short-term market movements often don't mean anything, yet Mr. Mueller here writes with certainty that the 2 day drop was a reaction to Obama's victory. Hm, I wonder if he would have made the same accusation if the Republicans had won.

    MF's hypocrisy is rapidly becoming unbearable.

  • Report this Comment On November 08, 2008, at 11:31 AM, oilisbad wrote:

    I have really lost all respect for you guys. What happened? It doesnt matter how much oil there is in the world you should be encouraging moral investment choices in sustainable planet friendly energy. I am disgusted. You are part and parcel of the problem of greed that has created the mess we are in.

  • Report this Comment On November 08, 2008, at 1:19 PM, JohnnyAngel33 wrote:

    Want to hear something scary, read this. About the U.S. looking at SCF or Shariah Compliant Finance.

  • Report this Comment On November 08, 2008, at 4:23 PM, ForVanessa wrote:

    Just remember that it is YOUR money you are investing and YOU can invest wherever YOU choose. Things may be predicated on investment "benefits" that may happen in consideration with Obama's economic considerations in what he may believe in helping this country....he will try: the plans might succeed and they might fail...but he HAS to try. Alternative energy is definitely an area that has to be question about it. Economies of scale in these fields have to be developed. Other considerations involve improved energy storage improvements (for instance, improved battery technology) and in improving the loss of heat in energy transfer and usage (an example is in validating superconductivity). Consider this in the latter point....with a compounded increase in energy consumption of around 3 percent per year, this planet will be producing more radiant energy than the Sun puts out in about 700 years.

  • Report this Comment On November 08, 2008, at 6:24 PM, kyddfool wrote:

    I don't know who this Mueller is but he is new at least to me at the MF. Yes, i agree, keep politics out of analysis, politics to yourself and let us learn the best way to keep our heads above the water in these trying times. We want facts, sir, just the facts about investing.............

  • Report this Comment On November 09, 2008, at 9:34 AM, deborahss wrote:

    To me it the post election fall bodes ill. Raising taxes does not seem to be wise nor is restricting trade at this time. I noticed Michigan Gov. Grandholm by Obama's side. If that is who Obama is getting advice from we are in for HARD TIMES! I did not think that the economy was that bad despite the loss of jobs. Really 6.1 was not that bad of an unemployment rate and housing was slightly up. I thought the economy and the market was going to just shake themselves out. Not now. I am moving my 401k to a money market account with an emphasis in U.S. treasuries for the time being. I guess if the government goes, it would be chaos, so why worry. I am going to prepare for the worst and hope for the best.

  • Report this Comment On November 09, 2008, at 10:48 AM, ReillyDiefenbach wrote:

    Well, we've had eight years of the worst that laissez faire unregulated capitalism can provide, and it has brought us to the brink of complete collapse. Someday, perhaps in better times, I'll count up the money I've lost following the advice of my various investment newsletters, Motley Fool not least among them. One hopes that the Obama team can reverse some of the damage. The Augean stables have nothing on this mess. He has a good many corporate friendly types in tow, so never fear, dear investors, your money won't be dropped from helicopters to feed the poor, although some sort of tax increase on the the wealthiest Americans would be far from a bad idea. An interesting stat: The ten states with the highest food insecurity (hunger) rates are Mississippi, New Mexico, Texas, South Carolina, Oklahoma, Utah, Louisiana, Arkansas, Kentucky, and Arizona. Notice anything about those states, with the exception of NM? In the richest country in the world, we have millions going hungry.

  • Report this Comment On November 09, 2008, at 8:36 PM, DLove23 wrote:

    I don't really understand why so many feel the article was negative about Obama. I'm an Obama supporter and voted for him with pride. I actually thought the article was a fair and unbiased look at what lays ahead.

  • Report this Comment On November 10, 2008, at 10:06 AM, ziq wrote:

    My take on B.O. is that he is interested in fixing things. Not in implementing a particular ideology, like free market or interventionism. If what he tries first doesn't work he'll try something else--in stark contrast to what we've seen over the last 8 years, when cutting taxes and deregulating was the stock answer to all economic woes, and all that needed to be done. That bodes well, at least for the long term--and isn't that how we all invest here? When the new administration gets to work and implements some policies, the market will stop reacting to rumors and start reacting to whether or not the policies are working. Obama will base his analysis of whether they are working not on just the stock market, but the big economic picture, listen to advisors with starkly contrasting views, and make his decisions based on his analysis of all the data and advice.

  • Report this Comment On November 12, 2008, at 11:01 AM, PaulDF wrote:

    What we are experiencing now will be known in the future as the "Obama Crash". It is a result of investors and businesses realigning their priorities from a business-friendly environment, to a business-unfriendly environment.

    Progressives view businesses as evil and facist. This is well documented. Reasonable investors understand this, and know that profit, which used to be a positive and good thing, is not being identified as an evil and negative thing.

    Welcome to the Obama Crash folks! The only mystery is knowing when it will end.

  • Report this Comment On November 12, 2008, at 12:30 PM, PaulDF wrote:

    ** correction ** NOW being identified as an evil and negative thing.

  • Report this Comment On November 12, 2008, at 9:50 PM, anacorider0 wrote:

    You are absolutely correct PaulDF.

    The first question regarding the Democrats is, Why do they wish to reduce the United States to a Third World Economic Power?

    Second question, What is the virtue in poverty?,

    Third question, What will be gained by leveling everyone to some ideological status?

    Fourth question, How many Democrat Politicos will personally embrace and be part of the leveling of their constituents and non-constituents?

    Fifth question, Will Obama level his daughters futuire? Michelle won't allow it, only everyone else.

  • Report this Comment On November 12, 2008, at 9:52 PM, anacorider0 wrote:

    CORRECTION: Last line should have read.

    Fifth question, Will Obama level his daughters future? Michelle won't allow it, only everyone else.

  • Report this Comment On November 14, 2008, at 8:40 AM, JeanDavid wrote:

    <I>What makes me worry most about what will happen to my portfolio does not even depend much on who won the election. It is this:

    'Possible government confiscation of private retirement accounts ... On October 7, the House Education and Labor Committee ... held hearings on "Saving Retirement in the Face of America's Credit Crises: Short Term and Long Term Solutions." One of the speakers was economics professor Teresa Ghilarducci from the New School for Social Research. She advocated that the US government seize 100% of assets in 401k and other private retirement plans and replace them with Treasury bonds paying 3% interest. Upon retirement, the bonds would be converted into an annuity. Upon death, there would be no retirement account assets in the deceased's estate."

    Excerpted from Liberty Coin Service's current newsletter at:

    Now this is just a suggestion on the part of one speaker, but one I find quite alarming.

  • Report this Comment On November 14, 2008, at 7:03 PM, Camacam wrote:

    A wise portfolio manager once advised me to "Know who the President is and never bet against him."

    I would submit that that is what the market is trying to figure out. It's early in the game but BO's only declarations are not investor or wealth friendly. As we come to know him better the market will settle at the level that is congruent with the political economic philosophy of the new administration.

  • Report this Comment On November 15, 2008, at 9:17 AM, tsowensjmi wrote:

    While there is a lot of ideology and political views expressed here, I think Camacam has it right. No one really knows what President Elect Obama is going to do and whether he will be able to get Congress and the American people to go along.

    The President Elect has shown that he is a very savvy listener and speaker, but we have not seen much yet to understand what issues and policies he will focus on first. If he focuses on divisive social policies, which doesn't appear to be the case at this point, that would make it harder to get support from the opposition and broader American public on difficult economic issues.

    In his rebuttals about the S word (socialist) charge, the President Elect spoke in terms favorable to capitalism and free markets. My personal view is that his policies are going to straddle the fence but lean slightly to the left like many of his answers to questions in the debate. That means incremental change to favor certain sectors, not dramatic change. He has already started to back off some of the more dramatic change rhetoric (tax hikes and cuts may be delayed, Iraq exit policy may be more measured, a NAFTA unilateral pullout policy is unlikely, nuclear and fossil fuels will be considered in an overall energy policy, etc.).

    If my assessment is accurate, then the markets will begin to calm down in the next couple of months as the economic bad news slows down but money will start flowing from some sectors to others and money may start moving back into the market but at a slow not rapid pace for at least two years until policies have had a change to make their impact one way or the other. In the meantime, the markets are going to swing up and down in a range +/- 10 percent range (centered around Dow 8,750, SP 875, Nasdaq 1,550).

  • Report this Comment On November 17, 2008, at 11:22 AM, fleming901 wrote:

    Your offhand remark about Mr. Obama changing to an iPhone, was, I hope, a huge joke. Hopefully,everyone knows that RIM Blackberries are the most secure phones in the world. Our President certainly needs that kind of security.

  • Report this Comment On December 01, 2011, at 4:03 PM, PaulDF wrote:

    Here we are; three years hence ~ and history has proven me to have been right. I wish it hadn't, but it is what it is.

    Our next step will be to determine if we allow the damage to continue, or to halt it now!

    You all know where I strand. Should have NEVER happened, should ABSOLUTELY NOT happen again!

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