When entering the site and if cookies are prevented from being saved, a message must be displayed
in a popup message box informing the user that their local browser settings are preventing
cookies from being saved and that cookies are required for the site to work. Exact text
to be provided for UAT. On OK click of the message, the user should be redirected to
the global landing page (currently ssga.com).
Investing by Sector During US Presidential Elections
Investing by sector has historically been one of the best ways to express market views during US elections
Sector ETFs were a popular tool during and after the 2016 US presidential election
High levels of return dispersion in 2020 have continued to provide opportunities to benefit from a selective investment approach
Disputed Election, Confused Market
The impact of the COVID-19 crisis on voting intentions among the US electorate has made the 2020 presidential election difficult to call. It is becoming more likely that the result could be disputed, leading to a period of policy paralysis, confusion for the investor and higher volatility in equity markets. Nevertheless, this uncertainty will not stop investors from trying to take advantage of possible outcomes and we expect to continue seeing high trading volumes in sector ETFs.
Investors tend to position their portfolios cautiously before elections, and the nature of this year’s election suggests that we may see a similar approach. Historically, investors have increased their equity exposure after the event, and often in a pro-cyclical manner.
Sector Investing During Past Elections
It is difficult to identify a clear impact of US presidential elections at the market level; studies show little difference between market performance during Republican and Democratic administrations. However, at a sector level there can be major implications. According to S&P Dow Jones, the average range in monthly S&P 500 sector returns (calculated as the best-performing sector minus the worst performing sector) between 1990 and 2019 was highest (15.18%) in November during election years, far above the 10.8% average difference across all months.
Election impacts can be observed when investors price in the anticipated effect of the election winner’s policies on different market segments. A recent piece of research by State Street Global Advisors suggests that sectors are more sensitive to election outcomes than broad-based equity split by size and smart beta.
The opportunity (or risk) for sector investors is measured by the dispersion of performance between sectors – we only need to look back to the 2016 election as a prime example. While the S&P 500 rose just 4% in November 2016 following Trump’s win, there was 19.3% difference between the best-performing sector (Financials) and the worst-performing (Utilities). The chart below shows the whole range of performance across all sectors.
Cumulative Total Sector Returns in November 2016
We can also see that excitement over sector winners and losers had an impact on ETF flows. The chart below shows net flows into sector ETFs (split between the three regions of listing). There was a clear rise in activity in late 2016, and at SPDR we witnessed higher interest not only among our US clients, but also with European and Asian investors. Incidentally, this graphic also shows a fall in sector ETF flows in March and April this year but a sharp bounce back since then.
Sector ETF AUM across Regions
Sector Considerations in this Election
As illustrated above, correctly identifying who would win the 2016 presidential election, and the anticipated sector impact, offered the potential for considerable relative returns.
In 2020, headlines have focused on the challenges to corporate America under a Biden administration, principally related to tax plans and the re-imposition of certain regulatory rules, but there would be some winners from his public investment proposals. For example, US infrastructure is underfunded, and continued dislocation following economic shutdown provides the necessary political case for fiscal spending to boost demand across the economy.
In his platform developed before the onset of COVID-19, Biden had foreseen an annual boost of roughly $500 billion focusing on health care, transport, housing and education. He has added a substantial front-loaded proposal to enhance government spending on research and development (half of which would be directed toward clean energy) as well as US-focused procurement of products, materials and services. By contrast, areas that would lose expenditure include defence budgets.
A change in administration could create selective investment opportunities. Even under a status quo scenario, with Republicans retaining the presidency and the Senate, it is sensible to take a nuanced view of economic prospects and unequal recovery in certain sectors.
As always, sector investing is a good way to target sector opportunities, as well as avoid parts of the economy that could suffer under new policies.
Depending on how the election plays out, we see three sectors in particular that could see their fortunes shift.
Health Care – This sector has been a political football for years, kicked around by both the Republicans and Democrats on changing insurance plans, threats on pricing and prescription processes. These threats continue, but the difference in 2020 is the need for the president to manage the country through a pandemic, relying on health care provision and supplies. Full opening up of economic activity is only possible with an effective vaccine. While we wait for a vacine, there will be a heavy reliance on virus testing and the search for a COVID-19 cure, also resting on health care companies.
Financials - During the last campaign, Financials was also in the cross-fire and then, early in the Trump presidency, the sector benefited significantly from bank deregulation and moves by the Fed. Less has been discussed in the current campaign. Banks may continue to do better under the looser regulation of the Republicans, although going forward this could be tinged by interest rates remaining low for a very long time.
Utilities – This is possibly the most interesting sector for playing green policies. Biden’s focus on climate change and consequential regulatory implications for fossil fuels could benefit the sector as it embraces cleaner electricity generation. There may be lessons from large European electricity providers that have seen a rerating on the back of their leadership in energy transition. However, under the status quo, there may be some relief for Energy companies after a difficult oil market during the COVID-19 crisis.
Investing involves risk including the risk of loss of principal.
Abu Dhabi: State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O. Box 764604, Abu Dhabi (United Arab Emirates) Regulated by ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. F: +971 (0)4-4372818.
Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia T: +612 9240-7600. F: +612 9240-7611.
Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 120, 1000 Brussels, Belgium. Telephone: 32 2 663 2036, Facsimile: 32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Ireland Limited. State Street Global Advisors Ireland Limited, registered in Ireland with company number 145221, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2.
France: State Street Global Advisors Ireland Limited, Paris Branch (“State Street Global Advisors Paris Branch”) is a branch of State Street Global Advisors Ireland Limited, registered in Ireland with company number 145221, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Paris Branch is registered in France with company number RCS Nanterre 832 734 602, and its office is located at Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. Telephone: (+33) 1 44 45 40 00. Facsimile: (+33) 1 44 45 41 92.
Germany: State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. Authorised and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”). Registered with the Register of Commerce Munich HRB 121381. T: +49 (0)89-55878-400. F: +49 (0)89-55878-440.
Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200.
Ireland: State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 145221. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300.
Italy: State Street Global Advisors Ireland Limited Milan Branch (Sede Secondaria di Milano) (“State Street Global Advisors Milan Branch”) is a branch of State Street Global Advisors Ireland Limited, registered in Ireland with company number 145221, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Milan Branch is registered in Italy with company number 10495250960 - R.E.A. 2535585 and VAT number 10495250960, and its office is located at Via Ferrante Aporti, 10 - 20125 Milano, Italy. Telephone: (+39) 02 32066 100. Facsimile: (+39) 02 32066 155.
Netherlands: State Street Global Advisors Netherlands, Apollo Building, 7th floor Herikerbergweg 29 1101 CN Amsterdam, Netherlands. Telephone: 31 20 7181701. SSGA Netherlands is a branch office of State Street Global Advisors Ireland Limited, registered in Ireland with company number 145221, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2.
Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501.
Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16.
United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The views expressed in this material are the views of Rebecca through the period ended 24 September 2020 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions.
This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future.
Concentrated investments in a particular sector tend to be more volatile than the overall market and increases risk that events negatively affecting such sectors or industries could reduce returns, potentially causing the value of the Fund’s shares to decrease.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
SSGA SPDR ETFS MAY NOT BE AVAILABLE OR SUITABLE FOR YOU. THE VIEWS EXPRESSED/INFORMATION IN THIS SITE DO NOT CONSTITUTE INVESTMENT ADVICE, FINANCIAL, LEGAL, REGULATORY, ACCOUNTING OR TAX ADVICE. INDEPENDENT ADVICE SHOULD BE SOUGHT IN CASES OF DOUBT. NEITHER THE INFORMATION NOR ANY OPINION CONTAINED ON THIS SITE CONSTITUTES A SOLICITATION OR OFFER TO BUY OR SELL SHARES OF THE FUNDS OR ANY OTHER FINANCIAL INSTRUMENT.
Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
SPDR ETFs may be offered and sold only in those jurisdictions where authorised, in compliance with applicable regulations.
Information related to Mexico
This information does not constitute and is not intended to constitute marketing or an offer of securities and accordingly should not be construed as such. The Funds referenced herein have not been, and will not be, registered under the Mexican Securities Market Law (Ley del Mercado de Valores) and may not be publicly offered or sold in the United Mexican States. Disclosure documentation related to any of the aforementioned Funds may not be distributed publicly in Mexico and shares of the Funds may not be traded in Mexico.
UCITS SPDR ETFs
SPDR ETFs Europe I Plc and SSGA SPDR ETFs Europe II Plc issue SPDR ETFs, and are an open-ended investment company with variable capital having segregated liability between its sub-funds. The Company is organised as an Undertaking for Collective Investments in Transferable Securities (UCITS) under the laws of Ireland and authorised as a UCITS by the Central Bank of Ireland.
This website is directed at Qualified Investors only, as defined by Article 10(3) lit. a and b. of the Swiss Act on Collective Investment Schemes (CISA). Certain funds may not be registered for public distribution with the Swiss Financial Market Supervisory Authority (FINMA), which acts as supervisory authority in investment fund matters, and such funds might not qualify as foreign Collective Investment Schemes under Article 120 of the Collective Investment Schemes Act. Accordingly, the shares of those funds may only be offered to Qualified Investors and not be offered or solicited to any other investor in or from Switzerland, unless they are placed without public solicitation as such term is defined by the Swiss regulations and/or FINMA from time to time The prospectus, the articles of incorporation, the Key Investor Information Document (KIID) as well as the latest annual and semi-annual reports may be obtained free of charge from the Swiss Representative and Paying Agent, State Street Bank International GmbH, Munich, Zurich Branch, Beethovenstrasse 19, 8027 Zurich, or at www.spdrs.com, as well as from the main distributor in Switzerland, State Street Global Advisors AG (“SSGA AG”), Beethovenstrasse 19, 8027 Zurich. For additional documentation regarding those funds not registered for public sale, please contact SSGA AG.
You should obtain and read the SPDR prospectus and relevant Key Investor Information Document (KIID) prior to investing, which may be obtained by clicking here. These include further details relating to the SPDR funds, including information relating to costs, risks and where the funds are authorised for sale.
US SPDR ETFs
The distribution of interests of U.S. SPDR ETFs in Switzerland will be exclusively made to, and directed at, qualified investors (the "Qualified Investors"), as defined in the Swiss Collective Investment Schemes Act of 23 June 2006, as amended ("CISA") and its implementing ordinance. Accordingly, U.S. SPDR ETFs are not registered with the Swiss Financial Market Supervisory Authority ("FINMA"). The legal documents of the U.S. SPDR ETFs can be obtained free of charge from Swiss Representative & Swiss Paying Agent State Street Bank International GmbH Beethovenstrasse 19 8027 Zurich, Switzerland Tel: +41 44 560 5000.
Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus which contains this and other information, download a prospectus here, or talk to your financial advisor. Read it carefully before investing.