Trump Triumphs: Stocks & ETFs To Rock Or Shock
Zacks Investment Research | Nov 09, 2016 01:23AM ET
Republicans have won back the White House with its candidate Donald Trump trumping several popular polls and defeating the favored Democratic nominee Hillary Clinton. The S&P 500 stock market index was one of the leading indicators among the very few forecasters that put Trump ahead of Clinton. The index viewed 10 ETFs to Watch Today and After The Election ).
Immediate Impact
Broader Market Slump
Republicans do not have a good reputation of pushing the market higher with average annual return of the Dow Jones Industrial Average being 3% since 1900, against 7% returns seen in Democratic rule.
As a result, a market crash is well expected as the unprecedented or rather market-unfriendly event is not priced in at the current level. Just as Trump started giving cues of a win, Dow futures plunged more than 9 ETF Ways to Guard Against S&P 500's Losing Streak ).
7 Inverse ETFs to Play Election Uncertainty ).
Leave Mexico/Short Mexico
Mexico peso is a Trump-unfriendly investment due to his plans of building a wall along the border as part of his immigration strategy and making Mexico pay for it. Mexico peso slumped over SMK .
Gold Bullion & Mining Stocks to Dazzle
The initial impact will be a safe haven rally. And so far, what Trump has delivered in speeches is mostly “inward looking, ” as per ABN Amro. As per the research organization, Trump’s policies may hinder U.S. growth and cause an upheaval in the domestic market pushing the safe-resort gold and ETF SPDR Gold Shares (NYSE:GLD) (V:GLD) higher.
Gold bullion futures were up about 4.9% at the time of writing. Investors should also take a look at gold mining equities like Timmins Gold Corp. Does The Donald Hold The Trump Card for Gold ETFs? ).
Treasury a Treasure Trove
Thanks to a flight to safety, yields on long-term U.S. Treasury bonds should come down and bond prices should rise. iShares 20+ Year Treasury Bond (NASDAQ:TLT) (V:TLT) should thus gain after Trump’s victory. Let’s not forget, he is ‘a ,’ boding well for bonds.
Medium-to-Long Term Impact
Bet Big on Infrastructure & Utility
Donald Trump is in favor of beefing up public spending by hundreds of billions of dollars on infrastructure. In fact, he is expected to offer $137 billion in tax credits to private construction companies undertaking infrastructure projects. Plus, a low rate environment would be an added advantage.
Thus, Utilities ETFs like First Trust Utilities AlphaDEX Fund (Equity ETFs that Can Gain Even If Trump Wins ).
Get The News You Want
Encouraging Fossil Fuels
Taking a completely difference stance from president Obama, Trump is ready to push for more fossil fuel generation, be it from crude oil, natural gas or coal. This in turn may hit low carbon and clean ETFs like iShares MSCI ACWI Low Carbon Target ETF KOL and Zacks Rank #2 coal stock CONSOL Energy Inc. (NYSE:CNX) may gain ahead.
Consumer Discretionary to Cheer
The Trump tax plan would lower the top income tax bracket from 39.6% to 33%, eradicate alternative minimum tax, slash corporate income tax by more than half and remove estate tax, as BJK .
A few top-rated stock selections in this category are ULTA Salon, Cosmetics & Fragrance Inc. TLYS , Las Vegas Sands Corp. (NYSE:LVS) and Vail Resorts Inc. (NYSE:MTN) .
Clear Path Ahead of Biotech
While Clinton-induced price-gouging issues are no more that a big hurdle, pharma and biotech stocks should get a break from controversies, at least for some time. So, the immediate impact should be positive on biotech ETFs like SPDR S&P Biotech ETF XBI . Zacks Rank #1 stocks Anika Therapeutics Inc. (NASDAQ:ANIK) and Cambrex Corporation (NYSE:CBM) could be on your wish list.
Regional Banks to Perform Better?
Historically, financial stocks have performed better with republicans in the White House thanks to their KRE could be a lucrative choice.
Now, since Midwest banks are in the top 9% of the Zacks Industry Rank, Zacks Rank #1 stocks Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) and Enterprise Financial Services Corp. (NASDAQ:EFSC) deserve a look. However, if bond yields continue to drop, the scenario might not be that great for financial stocks.
Defense in Sweet Spot
Trump appears aggressive in foreign policy. He stressed the need for additional investments in ITA or stocks like Northrop Grumman (NYSE:NOC) should soar.
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