☰
We would, in Wall Street parlance, put a "Hold" rating on gaming stocks at this point.
The decision on whether to invest long-term depends on the outcome of the race.
Hillary Clinton would, if elected, probably continue the economic policies of the current administration.
While President Obama gave the gaming bosses some scares immediately after his election, the industry has enjoyed an upward curve during his second term, with casinos coming to Massachusetts and Las Vegas enjoying record levels of visitation. Vegas gambling revenues have not regained the apogee of 2007 (and probably never will), but that was an aberrant year, the culmination of certain overheated economic trends (such as homeowners drawing down their equity) that are probably not going to be seen again in our lifetime. Also, gambling in and of itself has become such a convenient nationwide phenomenon that Las Vegas, while still an adult playground, is no longer a gaming-centric destination.
This is strictly one opinion, but we would not invest in gaming stocks in a Donald Trump administration. This has nothing to do with his (under-)performance as an Atlantic City casino operator and everything to do with his proposed economic bromides, many of which could result in less discretionary spending for the average American.
For instance, he has promised to tear up the North American Free Trade Agreement, thus initiating trade wars with other countries, which will almost certainly drive up the price of consumer goods.
Also, his proposed tax cuts would predominantly favor the very wealthy, adding trillions to the deficit (there is little argument on this point), while shifting the tax burden to the lower classes.
Any way you look at it, Trump's economic prescription means less spending money for the Average Joe (ironically, the bedrock of his support), which could have a catastrophic effect on gaming stocks, as would any clampdown on international travel.
But don't take our word for it. Registered Republican and MGM Resorts International CEO Jim Murren, after dropping hints about favoring "free trade" and "diversity," came right out and endorsed Clinton.
"Even Donald Trump's most fervent supporters would have to agree he's unpredictable and that's not good for the financial markets," Murren told the Las Vegas Sun. NAFTA renegotiation could alienate Canadian and Mexican tourists, vital to the Vegas economy, and "There is no resemblance to business practices that I admire from a standpoint of compromise, clarity, teamwork, integrity, and excellence that I see evidenced in Donald Trump as a businessman."
That's what one Fortune 500 CEO thinks. But don't take his word for it.
On November 3, a piece airing on "All Things Considered" on National Public Radio tackled this same question and determined that "Markets don't usually move too much based on who wins the presidency. But this time around, it's a different story, and as Donald Trump's prospects have improved, stocks have been falling" -- the S&P, for example, lost 3% in the previous week.
The report covered two Dartmouth economists who decoded recent movements in the stock market to calculate the economic impact of the election outcome.
The economists, in part, correlated movements in the stock market with the offshore betting sites, which they called the "political prediction market," to show that the stock market is rooting for Clinton and could gain 12% after Clinton wins the election. Normally, the market favors the Republican candidate, but only by around 2%.
Analysts explained that Trump is a wildcard, unpredictable, fluky. This leads to greater uncertainty about his policies and performance as president. And markets do not like uncertainty.
So if you believe this report and that Clinton will win, you might want to buy casino stocks in the next few days. They might go up, at least in the short term, on the news.