Tags: stocks | sell.midterm | elections

5 Stocks to Dump Now to Avoid Midterm-Election Fallout

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Wednesday, 14 November 2018 12:13 PM

The midterm-election results of a split Congress reportedly don’t bode well for a number of stocks, including defense stocks, pharmaceutical stocks and pharmacy benefit managers, or PBM, stocks.

Investors, especially those with a short- to medium-time horizon, should consider names in those sectors as stocks to sell, InvestorPlace recently reported.

Two big black storm clouds linger over the five most-vulnerable stocks:

  • Defense spending will probably be cut. President Donald Trump's clashes with Lockheed Martin (LMT) over the cost of the F-35 and with Boeing (BA) over the cost of Air Force One indicate that he is able and willing to cut the amount of money that the Pentagon pays to contractors.
  • Some healthcare stocks are in danger. Trump and his administration, unlike previous GOP administrations, have shown a willingness to reduce the amount of money that taxpayers and consumers give to companies in the big-pharma sector.

Amid that backdrop, InvestorPlace offered five stocks investors should dump now:

  • Lockheed Martin (LMT), which could be hurt by any investor worries about possible U.S. defense-spending cuts.
  • Merck and Eli Lilly. Merck (MRK) "has developed successful but quite expensive cancer treatment Keytruda. That’s exactly the type of drug that Trump and the Democrats are likely to target for Medicare cost savings," InvestorPlace reported. Eli Lilly (LLY) "has come under fire for raising the prices of several of its drugs, making it also vulnerable to Medicare cost savings initiatives," the report exlained. "Both stocks may be more vulnerable to profit taking and valuation declines than their peers if the government starts looking to cut drug prices."
  • CVS and Express Scripts. Both stocks (CVS) (ESRX) could easily get crushed if the president even comes close to fulfilling his threat of “eliminating … the “(drug) middlemen.”

The Bottom Line: Politics and Short-Term Investing Don’t Mix 

However, savvy investors will do all their homework and should consult professional advisers before making a snap decision based on the events of one day.

Political surprises and machinations may have short-term market implications but have proved to be mere blips in the long-term advance of the market, Reuters explained.

"And while it may be exciting to talk politics, history offers compelling evidence that the current political environment should not influence investment decisions. It is human nature to think the present moment is exceptional and greatly different from anything that has gone before," Reuters explained. But the market has weathered “unique” political environments before, and the past has generally demonstrated the value of developing a long-term plan and sticking to it, regardless of who is controlling Washington, the report said.

“Split control of Congress should offer a little more certainty. Less new, potentially business-friendly, regulatory legislation will be enacted, but what’s already been passed won’t be reversed over the next two years,” Lauren Basmadjian, senior portfolio manager at credit investment adviser Octagon, told Reuters.

“There could have been more deregulation if Congress stayed fully Republican and we may have seen some rollback of deregulation if the Democrats controlled both (houses), but instead it seems we’ll be at a stalemate for a while,” Basmadjian said.

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The midterm-election results of a split Congress reportedly don’t bode well for a number of stocks, including defense stocks, pharmaceutical stocks and pharmacy benefit managers, or PBM, stocks.
stocks, sell.midterm, elections
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2018-13-14
Wednesday, 14 November 2018 12:13 PM
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