With government spending set to increase for the first time in years, companies like General Electric and UPS that rely on government contracts for a high percent of their sales stand to benefit. The industrial sector could get a boost from the first increase in defense spending since 2010, as could aerospace and defense stocks.
It also seems increasingly possible that the government’s fiscal stimulus could embolden the Fed to move toward a path of interest rate normalization.
Fed Chair Janet Yellen said earlier this month that a December interest rate increase was a “live possibility” if data continued to indicate the US economy was performing well.4 While a December rate hike is not certain, the Fed has been eager for signs of additional fiscal stimulus and may be more likely to embark on a path toward rate normalization knowing the US economy will benefit from government spending that could offset the effects of monetary tightening.
I expect the road to Election Day 2016 will be a long one, with many twists along the way. In my next post, I’ll look at how stock markets tend to behave during presidential election years. From time to time over the next year, I will be blogging about the election and its implications for investors. If you have any election-related questions you’d like me to cover in future posts, please leave a comment below.
1Politico, “Congress passes budget deal,” as of 10/30/2015
2Washington Post, “What’s in the budget deal?,” as of 10/27/2015
3Washington Post, “House Passes $300 Billion Bill to Improve Roads and Bridges,” as of 11/5/2015
4CNBC.com, “Janet Yellen: December rate hike a ‘live possibility’,” as of 11/4/2015