Winners and losers in a Trump presidency

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Whether you love or hate the results, the presidential election is history and it is now time to look ahead and focus on the sectors that we believe will benefit from the policies that might be implemented during the early stages of a Trump administration. Keep in mind that President-elect Trump has changed party affiliations several times so it is difficult to pin down his core beliefs. That said, here we go.
As a real estate developer for more than four decades Trump has been accustomed to taking on debt. Furthermore, during his campaign, he has made mention of paring back some of the onerous regulatory requirements contained within The Dodd-Frank Wall Street Reform and Consumer Protection Act. With the above in mind, we believe that interest rates should rise from here, making financials, including money center banks, regional banks and credit card companies very attractive. Banks make money on the spread between the interest rate they credit depositors as compared to the rate they charge those who borrow. That spread should widen during a Trump administration, making banks more profitable. After the strong rally since the election this past Tuesday, consider initiating a position or adding to a current one on weakness.
Pharmaceutical stocks have been crushed over the past year as fears mounted that if Hillary Clinton should be elected President, she would regulate pricing. Obviously this did not occur and many believe that President Trump will not be as aggressive. These stocks jumped post-election as with the financials. Consider initiating a position or adding to a current one on weakness.
Despite what you think, we believe that Trump will put more money in the hands of the middle class. He has stated that a tax cut as well as tax reform will be a priority of his administration. Restaurant and retail stocks moved sharply higher since the election. Consider initiating a position or adding to a current one on weakness.
Infrastructure – An integral component of a Trump administration that corresponds with rebuilding the middle class via tax reform is an infrastructure program, meant to repair our crumbling roads and bridges. Many experts put a $500 billion to $1 trillion price tag on this spending program. Basic material, engineering and transport companies should be a beneficiary here. Look to add on weakness.
President-elect Trump campaigned on rebuilding what he believes is a depleted military. Companies in the defense industry should be the direct beneficiary as should be industrial stocks like General Electric. Once again, be careful and look to purchase securities in this industry on weakness.
Energy – We also believe that energy stocks should benefit from a Trump presidency for a variety of reasons, not the least of which being that by ramping up economic activity Americans will consume more fuel. Also, any infrastructure program will require oil byproducts. This should tip the supply/demand equation toward the demand side, pushing prices higher. We believe that these can be bought now.
Finally, look to buy a home or refinance your current mortgage over the next three months or so. Chances are that interest rates are going higher. Lock in these multi-decade low levels now.
On the flip side, some asset classes should underperform going forward. Once again, we do believe that interest rates are headed higher. This should put downward pressure on Real Estate Investment Trusts, bonds of all kinds and income-oriented stocks such as utilities and telecoms.
In closing, be careful out there due to the fact that as of the date of the writing of this column, stocks have rallied sharply since, despite little or no news. There’s no telling whether this is the beginning of a longer-term move or just a head fake.
Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks, and fluctuations in principal will occur. Research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, call 279.1044.

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