Investment implications of last night's debate; An important reminder about politics and investing

As regular readers know, I do my best to keep politics and my personal political opinions out of my daily investing e-mails.

But I would be remiss if I didn't address the topic on everyone's minds today: the presidential debate last night.

However, as I've done in the past with this kind of topic, I'm going to keep the discussion focused on the investment implications rather than political leanings...

By all accounts, President Joe Biden lost badly. A CNN flash poll of debate watchers showed that 67% thought former President Donald Trump won. And here are the headlines from four liberal columnists in the New York Times this morning:

With increasing calls for Biden to step aside, investors on real-money betting site PredictIt have sharply lowered their odds that he will be the nominee from 86% yesterday to 64% as of this morning.

Meanwhile, also as of this morning, the odds that he wins the election plunged from 45% to 33% (and they're even lower, at 20%, on Polymarket).

So is it time for me to make a big call like my former colleagues and I did at my prior firm Empire Financial Research in the run-up to the previous presidential election?

Back then, we correctly predicted a "blue wave" in which Democrats would win the White House and both houses of Congress. (To be clear, our prediction wasn't based on what we may have personally wanted as the result or our political leanings... but rather our unemotional analysis of the polling data.)

In a special issue of my former newsletter Empire Investment Report on September 16, 2020, my team and I recommended eight stocks that we thought would benefit from the blue wave:

1. Gun maker Smith & Wesson Brands (SWBI), because gun sales typically soar when gun owners fear Democrats will try to restrict gun sales 
2. Ambarella (AMBA), which makes semiconductor chips for autonomous driving
3. Ormat Technologies (ORA) – which designs, develops, builds, owns, operates, and sells geothermal power plants – as a green energy play 
4. Ameresco (AMRC) – which modernizes customers' energy infrastructure – as another green energy play
5. Building materials company Summit Materials (SUM) – an infrastructure play
6. Citi Trends (CTRN), a retailer that serves low-income customers who might benefit from an increase in the minimum wage
7. Cannabis company Green Thumb Industries (GTBIF)
8. The London Stock Exchange listing of online gaming company Flutter Entertainment (FLTR.L) – a play on the legalization of sports betting in the U.S.

Both our election prediction and stock ideas proved prescient...

Nearly all of our recommendations soared in the aftermath of the election, leading us to quickly close out six of the eight positions and half of Citi Trends, banking big gains.

In total, readers who followed all of our buy and sell recommendations would have earned an 86% return versus only 17% and 26%, respectively, had they bought the S&P 500 and small-cap Russell 2000 indexes on the same dates. Take a look at the breakdown in the table below...

I'm always looking for big ideas like this to give my subscribers great money-making opportunities, so I'm thinking hard about whether there will be a "red wave" this November that would lead certain stocks to soar.

For example, Republicans typically favor fossil fuel industries... so companies in oil, natural gas, and coal could benefit. And they generally want to reduce regulations, so heavily regulated industries like finance and pharmaceuticals could also benefit.

But I think it's still too early to make such a call, for two main reasons...

First, while Trump is now clearly the favorite to be our next president based on the real-money betting sites, he's not the overwhelming favorite. As of this morning, PredictIt and Polymarket have his odds of winning at 59% and 64%, respectively – up only a few percentage points since the debate.

Why hasn't he seen a bigger bump?

Because the chances that the Democratic candidate is someone other than Biden just went up a lot. For example, according to PredictIt this morning, the odds that California Governor Gavin Newsom becomes the Democratic nominee soared from 5% to 18% in the past day.

People are clearly considering the possibility that last night's debate could turn out to be a blessing in disguise for Democrats if it results in Biden being replaced by a stronger candidate.

Second, we have a system of divided powers... so for Republicans to truly be able to implement their agenda, they would need to sweep the White House and both houses of Congress.

While Democrats were able to pull this off four years ago, it's not easy – many voters like a divided government. So, for instance, someone might vote for Trump at the top of the ticket but a Democrat for the House and/or Senate. According to Polymarket as of this morning, while Trump is 64% favored to win, the odds of a Republican sweep are only 52%.

So for now, there's too much uncertainty for me to have conviction about any particular outcome, much less for me to tell my subscribers to wager their hard-earned money on it.

But that's OK. Things will become more clear over time – and we still have plenty of time. Neither party has even thrown its nominating convention yet. Last time around, my former team and I waited until mid-September to make our big – and highly profitable – call.

If my team and I here at Stansberry Research make a similar call, our subscribers at Stansberry's Investment Advisory will be the first to know. (If you aren't a subscriber already, right now you can become one for an incredible 75% off for the first year – and we offer a 30-day money-back guarantee, so it's 100% risk-free to give it a try – by clicking here.)

In the meantime, resist the urge to do something rash. As I wrote two weeks ago:

It seems like everyone thinks the world is going to come to an end if their guy doesn't win.

I think the winner of the presidential race will matter a great deal in almost every area – except stocks.

Stocks did great under former President Donald Trump until COVID-19 came out of left field. And stocks have also done great under President Joe Biden.

From the day Trump was inaugurated to the market's February 2020 peak before the pandemic escalated, the S&P 500 Index rose 49%. And from Biden's inauguration through yesterday's close, the S&P 500 is up 41%...

If you want to be a successful investor over time, you can't let your emotions – which include your political leanings – affect your analysis of economic factors and your investment decision making.

I said it two weeks ago and back in my January 24 e-mail: Don't let your politics affect your investing.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.