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We Steady Our Wobbly Knees: A Post-Presidential Election Review

Our roller coaster ride of a presidential election provided us with 18 months of political thrills, including one of the biggest surprises in U.S. history. Now that our collective adrenaline levels have settled a bit, we’ve collected some thoughts about the election and how it might benefit investors like you.

After the Election: The First 100 Days

So, what’s likely to happen in President-elect Trump’s early presidency? Given the blanket media coverage of Mr. Trump’s cabinet appointments and unconventional leadership style, maybe we should start after the election and count the first 172 days. When we do that, here are the latest signs and portents:

  • Post-election stock values increase, at least for now. We did not suffer the financial Armageddon predicted before the election. Instead of crashing, stock values have largely grown and continued their upward trend since November 11th. Market makers must take Mr. Trump’s anti-regulatory and tax reduction promises seriously enough to make long-term stock investments worthwhile (more about that below).
  • Cabinet choices include some government newcomers, but financially steady heads prevail. By now, Mr. Trump has made most of his Cabinet appointments. Although a few appointees have little government experience, many have developed financial savvy (and anti-regulatory attitude) in the private sector. Others developed anti-regulatory and tax reform track records in Congress.
  • A generally pro-growth government. Combine Mr. Trump’s policy leanings, his Cabinet appointees’ experience and a Republican House and Senate ready to stimulate the economy. Taken together, these signs point to a government ready to do things differently.

But how can you turn what we know about the (likely) future into a tidy profit?

What’s Next? Looser Regulations and Congressional Pocketbook

We can expect more fiscal spending and less regulation in the next administration. That makes stock picking in five sectors especially attractive. Consider stocks in five areas, our picks for a Trump portfolio. They provide best greatest growth potential in a Trump presidency.

  • Deep cyclicals.
    More fiscal spending and a weaker US dollar are likely to favor more growth in general and investment in deep cyclicals. This reflects a continued 6-to-12-month growth trend.
  • Consumer cyclicals.
    The holiday spending season and ongoing improvements in jobs and wages point to more spending for discretionary goods and services.
  • Oil. Mr. Trump favors fossil fuel sources such as oil, gas, and coal. Much of the energy sector could profit from looser regulations and easier access to federal lands.

For example, exploration and production companies such as those active in the West Texas Permian Basin could benefit from a flight to energy stocks. And the Trump victory would benefit companies that provide hydraulic fracturing products and services.

  • Financials. More than half of the S&P 500’s post-election gain of 10.7% was due to financial stocks, mostly banks. This enthusiasm reflects the bet that President-elect Trump will support legislation to deregulate the industry and appoint regulators, who are more industry-friendly than those appointed by President Obama.
  • Defense. President-elect Trump made no secret of his wish to make America’s military great again. The defense sector will definitely benefit from renewed attention, which will update many current weapons systems. And the Republican-controlled Congress will be happy to fund the White House’s effort.

That’s our first-grasp summary of post-election results. Come back again in January for an update of news and investment advice.