Trumpiversary: Here Are The Winners & Losers
Zacks Investment Research | Nov 08, 2017 09:33PM ET
Before President Trump’s election, many pundits found it difficult to assess the outcome of his victory as his proposals seemed contradictory or lacked details. On the contrary, such pro-economic policies helped technology and financial stocks rise sharply, helping Wall Street’s major equity indicators showing the best rally in the past 81 years.
Defense stocks have, in fact, left the rest in the dust. The sector gained the most following tensions between Trump and North Korea. Trump’s Afghanistan strategy has also lent such stocks a fillip. However, not everyone has partaken in this year-long rally. Let us thus take a look at the potential gainers and losers of the ‘Trump trade’.
Trump Rally Fed Off Wall Street Anxiety
It’s been a year since Trump’s stunning performance on election night that had rattled the global equity market. The Dow futures tumbled nearly 900 points as investors remained concerned about Trump’s questionable campaign promises on trade and immigration.
But, investors’ apprehensions ebbed by morning and U.S. stocks started moving north. In fact, the Dow’s 1-year gain since Trump’s win turned out to be the highest post-Election Day rise since 1945. The blue-chip gauge surged 28.5% since Nov 8, 2016.
The S&P 500 also rallied 21% since the close of trading on Election Day 2016. This is the benchmark index’s third best performance during a President’s first election since World War II, lagging that of Presidents John F Kennedy (1960, 29%) and George H. W. Bush (1988, 23%), as per Sam Stovall of CFRA Research.
Though Trump had taken over a progressing economy with the stock market near an all-time high, his pro-growth and business-friendly policies as well as bets on deregulation gave investors ample scope.
Technology and Financials Benefit From Trump Policy
Promises of pro-business legislation by Trump have primarily supported the gains for the software industry and the manufacturers of the internal technologies — the semiconductor makers. The House’s latest corporate tax plan will lower taxes from 35% to 20%. As a result, tech companies’ after-tax earnings will improve and lead to repatriation of trillions of dollars held abroad by such companies. Tech companies can use this extra cash for research and developments, and mergers and acquisitions.
If the bill turns into a law, tech bigwigs including Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) as well as semiconductor giant NVIDIA Corporation (NASDAQ:NVDA) will largely benefit as they have billions of dollars stashed outside the United States. In fact, NVIDIA – Zacks Rank #2 (Buy) stock – became the biggest gainer since the election, up a staggering 209%. Looking at the big picture, the technology sector is up around 39%. You can see Zacks Investment Research
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