Regardless of Who Wins the White House, These Stocks Should Rally

Let me say that what follows is in no way, shape or form an endorsement of Hillary Clinton or Donald Trump. Frankly, I'm not happy with either candidate and simply want what's best for our country, its citizens and its economy. 

Political beliefs aside, I am a believer in statistics. While everyone loves a good underdog in sports, sports betting odds and political polls are two very different beasts.

While both are based on who people believe will win, sports odds are not nearly as accurate a predictor because it's up to the athletes to perform. Those placing the bets cannot actually influence the game.

Election polls, on the other hand, are statistics based on the opinions of voters who directly influence the outcome. 

The more polls that predict the same outcome, the higher the probability of that result. When it comes to election polls, the chances of an underdog winning are slim. 

Heading into this week, nearly every poll showed Clinton winning, even though recent developments regarding her email scandal have given Trump a significant boost. 

Nate Silver's FiveThirtyEight, a statistics-driven news website, gave Trump just a 34% chance of winning the White House. CNN's poll of polls, which is an average of the nation's top five polls, has Clinton in the lead by 3 points. And the latest data from poll averaging giant Real Clear Politics has Clinton winning 46.6% of the popular vote with Trump taking 45.3%. 

But Clinton's Electoral College advantage is what's likely to put her in the Oval Office. 

Moody's Analytics model, which has had a perfect record of predicting the presidency since 1980, forecasts Trump will capture 206 electoral votes, with Hillary taking 332. (A candidate needs 270 to win the White House.) Moody's does note that its projections "are solely a reflection of economic and political conditions upon the incumbent party, and do not take any aspects of the individual candidates into account." 

But according to the NBC News Battleground Map below, even if Trump manages to win all the "tossup" states, he will still lose the election.

Markets Eager to Maintain the Status Quo 

While the stats are not on his side, Trump has seen his polls numbers rise recently as sentiment shifted against Clinton with new developments in her email scandal, related to top aide Huma Abedin. 

During an investigatory probe of Abedin's estranged husband, former Congressman Anthony Weiner, the FBI discovered a cache of Abedin's emails on her husband's laptop. The agency is now analyzing those emails under suspicion that they may be related to the separate probe of Hillary Clinton's personal email use. 

As we can see below, stocks sold off as Trump's chances of becoming president increased.

That's because the market had all but baked in a win for Clinton, who is largely expected to maintain the status quo. Trump is more of a wild card, and the markets hate uncertainty. [Note: Markets rallied Monday after the FBI maintained Clinton should not face criminal charges following a review of the new emails.]

Even though our nation has its share of issues and central bank meddling has artificially inflated asset prices, there's plenty for Americans to feel good about. We just saw the biggest gain in GDP since the end of 2014, unemployment remains low, stocks are trending near all-time highs, fuel prices are down and home values are up. 

What's more, the third quarter is shaping up to snap a five-quarter earnings recession. With more than 70% of companies in the S&P 500 announcing earnings already, Bloomberg reports an earnings growth rate of 1.6% on a 0.5% increase in revenue. 

A Clinton win should cause stocks to move higher in the near term or at least prevent a sell-off, while a Trump win would mean more uncertainty and could send the broader market lower. 

Yet, there's an interesting caveat here. While a Trump presidency may be a wild card for stocks, regulators and multinational businesses, he has made big promises to help smaller businesses, to bring jobs back to American factories, and to amend or nix trade deals that send jobs and money overseas. 

Small caps have borne the brunt of the selling over the past month, with the Russell 2000 down more than 6% compared to a 3% decline in the broader market S&P 500. And this is despite the fact that the Russell's earnings growth (4.1%) and revenue growth (2.8%) have significantly outpaced the S&P 500's.

The companies in the Russell 2000 do the vast majority of their business in the United States, so Trump's pro-American business policies could cause money to flow back into them. 

In other words, a Trump victory could send small caps higher, and in the more statistically likely scenario that Clinton wins, this group should rally along with the broader market. 

Traders who act fast can play this with the iShares Russell 2000 (NYSE: IWM), an ETF that tracks the small-cap index.

While buying shares outright is certainly an option, I plan to increase my odds of success using a Wall Street insider secret that I picked up when I was a, well... a Wall Street insider. It's perfectly legal and it's accessible to almost all traders -- most people just don't use it because they aren't in on the secret. 

With this trade, IWM could rally after the election, stay put or even fall as much as 5% and I'll still achieve my maximum profit. 

Think about that for a minute and consider what a strategy like that could mean for your portfolio. Even if you don't call stock moves perfectly, you can still come out a winner. That's why I'm letting traders in this Wall Street insider secret here.

[Market Outlook] Why I Can't Stop Talking About The 200-Day Moving Average
Premium Content  | Amber Hestla | February 12, 2019

Many investors hold strong opinions about the 200-day MA... but is it actually important?