1 Reason Donald Trump Could Become More Moderate

In a new report, Citi Research analyst Tobias Levkovich discusses the status of the U.S. presidential election and the implications that the election of frontrunners Hillary Clinton and Donald Trump could have for investors. According to Levkovich, some of the more extreme rhetoric from both candidates will likely start to disappear following their official nominations.

“We continue to think that the nominee for either party will adjust his or her language and moderate the bombast in order to look more presidential (with the vice presidential candidate often playing the role of the attacker) once the conventions are over with in September,” Levkovich explains.

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He went on to say that investors that are worried about the potential market implications of some of the ideas being batted around by the candidates should remember that there is a big difference between hitting political talking points and passing legislation.

“Investors seem troubled by statements from the various candidates, though primary season statements may be different versus actually winning an election and passing legislation,” he notes.

For investors looking ahead to the next U.S. presidency, Levkovich notes that Republicans have traditionally been seen as positive for energy and defense and Democrats are seen as good for alternative energy and bad for healthcare.

In the past six months, the iShares Dow Jones US Aerospace & Def. ETF ITA and the Energy Select Sector SPDR (ETF) XLE have outperformed the S&P 500, while the iShares S&P Global Energy Index Fd ICLN and the Health Care SPDR (ETF) XLV have lagged.

Disclosure: the author holds no position in the stocks mentioned.