The inauguration of Donald J. Trump as the 45th president of the United States takes place in less than 24 hours.
For investors, the Trump win has already had a big influence on money, markets … and likely your portfolio.
Yet what will the investment landscape look like next week, next month, and over the next 100 days?
What indicators do we need to watch — and what areas of the market do we need to monitor — to tell us which way the market winds will blow (other than the actual price action in stocks)?
Today begins a special, two-part series on getting your money ready for Inauguration Day … and well-beyond.
First, we’ll look at what the bulls will be watching that will keep them buying. Of course, we’ll also look at what the bears are hoping for that will get them excited.
In Part II, we’ll look at the specific sectors to consider if the Trump/Republican administration is executing on its promises. We’ll also look at the sectors you’ll want to stay far away from if Trump gets caught in the Washington swamp.
If we look at what the markets have done over the past four to five weeks, we see traders basically keeping things in a very tight, relatively calm, trading range.
This doesn’t come as too much of a surprise to me, especially after the “yuge” four- to five-week run-up in stocks that took place right after Election Day.
Yet the calm here is far from a sense of blasé about what might happen post-inauguration.
Rather, it has much more to do with the smart money thinking that just about anything can happen with the unknown quantity that will be President Donald Trump.
That doesn’t mean things are going to be bad; however, it also doesn’t mean there’s any kind of consensus out there among professional money managers that things are going to be great again.
For investors, the Trump presidency presents opportunities to profit from either the Trump/Republican policy successes … or from a Trump/Republican epic policy fail.
As I mentioned yesterday to subscribers of my Crisis Options Trader service, the only thing on Wall Street’s collective mind right now is what is going to happen throughout the first 100 days of the Trump administration.
The bulls are hoping for some very early regulatory rollback, as well as some positive steps on issues such as the Obamacare repeal-and-replace, and Trump’s promise of a fiscal stimulus package that includes big-dollar infrastructure spending.
The real hope, however, is for corporate tax reform.
If Trump and his Republican partners in Congress can get a marked reduction in the corporate tax rate within the first 100-200 days, it could be the big “Orange Swan” event that sends markets higher.
Why is corporate tax reform so crucial?
Because if the corporate tax rate gets slashed down to 15%-20%, then corporate bottom lines will swell. That means earnings per share will get a big boost … and that would justify current market valuations of some 18x-19x earnings on the S&P 500.
If Trump and Congress can manage to pass corporate tax reform early on — and if it looks like there is solid progress being made on Obamacare reform, regulatory reform and fiscal stimulus — then there will be specific stocks in specific sectors that benefit.
We also would likely see a continuation of U.S. dollar strength, higher bond yields, and continued selling in traditional safe-haven assets.
If, however, we see the Trump/Republican pro-growth agenda run into bigger roadblocks than anticipated, it could mean a sharp “sell-the-president” move in stocks.
This selling also would have the effect of sending the U.S. dollar lower, bond prices higher, and traditional safe-haven investments higher.
In tomorrow’s Afternoon Edition, we’ll go over some specific sectors, as well as some specific investments to look at, for either of the scenarios mentioned today … so be sure to tune in.
If you want to weigh in on today’s issue, or any of the issues we cover here in the Afternoon Edition, then I encourage you jump right in. Moreover, doing so is as easy as leaving me a comment on our website or sending me an e-mail.
U.S. stocks started the day in the black but quickly turned lower on mixed earnings reports. The Dow was down more than 100 points in the afternoon session but trimmed its loss to 72 points (-0.4%).
• Something to ‘Cheers’ about: Remy Cointreau (REMYY) said revenue for its cognac rose 22% in the just-ended quarter. Surging purchases of high-end spirits in the UK, South Africa, China and Russia helped to boost the bottom line. Shares gained 8% today.
• 98-straight weeks: That’s how long initial jobless claims have come in below 300,000. New data shows 234,000 claims were made last week, putting the monthly average at 246,750.
• No changes at the ECB’s first policy meeting of the year. ECB President Mario Draghi reaffirmed last month’s decision to scale back asset purchases, and left interest rates unchanged.
Good luck and happy investing,
Uncommon Wisdom Daily