We're just a week away in this marathon of a Presidential race. It been grueling; not only for the candidates, but for those of us that are addicted to the news. Yeah, that's me! Just so you know my level of frustration with both of our choices for President, my Wife no longer allows hard objects in our TV viewing room. In the last few weeks, based on Trump's missteps and the release of the "Access Hollywood" video, it seemed like Hillary Clinton was running away with it. Now, with the recent news, as focus turned to the Clinton Foundation and the FBI having reopened the probe on Hillary's emails, its back to a toss up. Investors were loving the idea of the Hillary win, as the prospect of the "status quo" kept the stock market near all-time highs  That would be congressional gridlock and the Fed maintaining the extreme ease, jawboning about interest rate increases, while trying to keep the next leg of the "Great Recession" from caving. Well that does give away my conservative stance when it comes to investment strategies these days.

With HRC's coattails being shortened a bit the past week, the odds of her "public mandate" have been reduced. Under the assumption that she does win, and we do stay in that gridlocked condition, the stock market is likely to celebrate to the upside for a while. Though, the companies that have suffered from the prospect of her winning will likely take a quick hit. The most obvious are in health care. Hillary has loudly attacked "predatory drug pricing," and is already talking "Single Payer" as the solution to Obamacare. With odds high of Republicans holding the house, that will be a very long and losing battle (for us all). Still, the stocks most negatively effected by the prospect of a HRC win are in that sector. And with those stocks already being beat up, a further sell off could be short-lived and great buying opportunity, as much of that is likely baked in the cake. If Clinton were to win both houses, the market is likely to react to the downside. That, still, should offer similar opportunities, though I might step in a bit more slowly.  

Under the less-likely event of Donald Trump winning (I'm trusting odds-makers over polls), we might have to be a bit slower on the trigger in adding long positions, as the stock market is likely to take quite a hit, possibly prolonged. Investors are just not prepared for this unknown. And they have been buying and balancing portfolios based on the higher odds of a Clinton win. His nationalistic, tough on immigration, anti-free trade rhetoric will ring in the ears of investors upon his win. The Donald's solution to the health care issue are far more vague (Don't hear that as worse). His "increase in competition" will take quite a while to implement. If he wins, despite a likely market shock, health care and drug stocks will probably soar, and  we won't get a chance to buy them at these prices. A betting person might take some small positions in advance in these stocks. Remember, I said if HRC wins, these stocks are likely a good buy on the dip. It feels like a win-win to me. 

Another group in which to focus is defense. Both of the candidates talk "rebuilding" U.S. defenses. This is not new news, and this group has, mostly, done very well. There are still a couple of stocks in the group that look like good opportunities, which I will mention below.

I also like materials. A Trump win will be great for the US steel stocks, as he will be hard on countries that have dumped their excess production here. And his anti-trade stance (he says "fair trade") will lift the materials group. Since a Hillary win will be pro-stimulus (more FOMC madness) this group should do well in either case. I a few of these to mention below also.

And the last group to discuss, in this regard, is the banks. These stocks are in great stock patterns, rising steadily on decent earnings and the prospect for higher interest rates. HRC will keep things much as they are. Trump says he'll dump Yellen. If that means dis-empowering the Fed and leaving real pricing to the markets, I'll do a dance. In any case, even with a slow trajectory, rates look to rise. A steeper yield curve, historically, raises bank margins. There are quite a number of these stocks that should continue upward no matter who wins.

I admit, my portfolio is has quite a high net cash position at this point. That's based on a lot of issues which I'll mention in my summary below. Based on my inherent trader mentality, my high level of cash is also to be able to sidestep post-election chaos. We don't want to be the ones who panic, you see. So with that bias, this discussion goes to the portfolio setup that offers the highest odds of over-performance, based on our work, coming into and post-election. So the following are what we think are the best stocks out of which to build a pre-election portfolio, with a reduced overall equity exposure. And we think many of these stocks offer the best opportunities going forward, no matter which of these "candidates" (cough) win. 

Our favorite stocks around this election are in these groups: healthcare/drugs, defense, materials and banks. Our choices are based on technical patterns and relative valuations: 

In the healthcare and drug category:  HMO's UNH technically seems the best. In the drug category, BMY and MRK are very overdone on the downside and offer a solidly positive risk/reward. In Biotechs, BIIB is the clear winner based on our cycle work. 

In the defense group: LMT and NOC both had solid earnings reports and are in very good technical patterns that suggest new highs are quite possible

In the materials/steels category: We want to stick mostly to the U.S companies. And copper and base materials look ready to rise. So we especially like FCX  and CLF. There are some very mixed patterns in steel stocks. NUE looks like the best opportunity around this election.

In the banks, its tough to sort out which are the best, as there are so many good technical patterns. And there is an issue of valuations, as this group, overall, has risen to some relatively pricey P/Es (for banks). We would avoid the temptations from the damaged ones, like DB​ and WFC, favoring the stocks that have strong upward momentum and better valuations. Our favorites are: BAC, C, USB and PNC.

So thats our list of favorite groups and stocks that we believe can over perform the stock market in what may be a chaotic market condition after this election. Its a small number out of our 325-stock analytical list of high and mid-cap stocks. Like I said, I think its time to have a conservative approach and low equity exposure.  You may chose to have a way more aggressive portfolio than that which makes me comfortable. I guess at 42 years in the markets, I've come to be more conservative than I was in my younger "gunslinger" years on the trading floors. Or maybe its just that my trust level is sharply diminished, based on the present levels in the stock market, worldwide Central Banks' control of the economies with their abhorrent manipulation and these sad choices for the President of the United States.