With the highly anticipated State of the Union address tonight, traders and investors need to position themselves for maximum gains tonight.
You may not think of the State of the Union as a tradable event, but there are many topics for which investors should be prepared.
President Obama will definitely be discussing the employment outlook and various ways to increase jobs growth, as well as the economic recovery in general.
There will be other specific mentions (even public companies) and topics that may help investors to make better investment decisions in 2011.
Valerie Jarrett, White House Senior Advisor, said on Bloomberg TV this morning that Obama will focus on education investment and infrastructure investment. In light of this, investors will want to follow several for-profit educational institutions like Corinthian Colleges, Career Education and Apollo. In addition, Benzinga readers know that a report by Piper Jaffray states that TAL Education has solid fundamentals and its 3Q results exceeded expectations, so this is another name to watch for the speech tonight.
Jarrett also confirmed that Obama will speak on the need for infrastructure investment: commerce, shipping, utilities, and construction. If Obama makes heavy recommendations for infrastructure investment (or a call for increased funding), consider Gencor Industries, a company responsible for providing heavy machinery and materials for highway construction.
In addition, Obama will discuss the current deficit, a perennial topic of heated debate between democrats and republicans. Jarrett also said Obama will talk about how to address the budget deficit in a responsible way.
Obama may also discuss the healthcare reform, yet another topic which faces much scrutiny by republicans as they threaten to attempt a repeal of the bill. Stocks that are always correlated to heathcare include Humana and United Health.
Of particular interest to the younger generations tonight will be the topic social security. Obama will talk about the social security crisis in context of the budget and the broad frame of strengthening social security, Jarrett said.
Though unconfirmed, Obama will likely highlight General Electric as a great example of investing in America. Jarrett confirmed that Obama will emphasise domestic investment, including some specific examples. If Obama highlights General Electric in front of millions of people, the possibility exists that GE will get a slight boost in the morning. Obama recently named GE CEO Jeffrey Immelt as head of a Council on Jobs and Competitiveness.
In international affairs, it is not clear which particulars Obama will discuss, but most likely he will cite his recent meeting with China’s Hu Jintao. Following Obama’s meeting with Hu Jintao, Obama stated that the Chinese leader promised to establish a more “level playing field” for U.S. trade, according to CNN. This may be interpreted as an agreement for China to allow the value of its currency to rise in order to alleviate the large trade imbalance that exists. Investors may consider currency futures in the Chinese Yuan if, indeed, Hu will allow the value of the currency to rise. The ETF for directly tracking the US dollar is NYSE: UUP.
Obama may also discuss the recent tragedy at the Russian airport where 35 people were killed and 150 others were injured by a suicide bomber, according to Reuters. Obama may discuss future relations with Russia in the aftermath of the tragedy.
For investors to capitalise on the State of the Union, it will be important to read between the lines and think about stocks and markets that will be affected by his speech. Stocks to watch are GE, COCO, CECO, APOL, XRS, GENC, HUM, UNH, UUP. Obama will likely keep his speech positive which may have an overall positive effect on the market. Taking this into consideration, investors might also consider the SPDR S&P 500 ETF.
This article may include mentions of rumours, chatter, or unconfirmed information. Readers should beware that while unconfirmed information may be correlated with increased volatility in securities, price movements based on unofficial information may change quickly based on increased speculation, clarification, or release of official news.
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— Gary Cassady