Getting Your Money Ready for Inauguration Day, Part I

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.

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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.

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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.

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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,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “Getting Your Money Ready for Inauguration Day, Part I”

  1. Trump is an adolescent bully. He has no plan that can be analysed or discussed. He throws out some sound bites via twitter and the crowds cheer.
    Improving the bottom line of companies seems to be a worthy goal but it is not. Forgiving taxes leaves a big hole in the budget. Don’t we have already enough debt? And what good does it for companies? Nothing, because the money will mainly be used for share buy-backs and not new activity. With other words, the money will flow into the pockets of the people who already have enough of it. One should not forget that barely any company pays the top tax rates, they pay mostly around 20%. There is a lot of disinformation going around and it makes me angry.
    Besides the “promised” infra-structure spending Trump seemingly wants to spend even more money on the military. Another gaping hole in the budget. When I learned about the economy the consensus was that you cannot spend more than you have. Washington seemingly does not listen to anyone with a brain.
    Today I heard someone saying: “They just started construction on this road”. The way it was said was as if Trump had anything to do with it. No, he hasn’t. And if he had I would blame him for the end of construction in our neighbourhood.
    People need to get their emotions under control and refrain from the person and celebrity cult.

  2. Since most corporations of consequence do not now pay anywhere near their hypothetical tax burden, lowering the “official rate” would have little effect… unless, of course, the multiple loop holes/dodges were eliminated in which case nothing would really be changing as much as it might seem. IF, on the other hand, corporations were somehow given a truly golden tax break and thus paid enough less for them to really care, then the our federal debt would increase even more and the non-corporates, sometimes called citizens, would again be left holding the increasingly heavy bag. What am I missing here?

  3. Hey Joe; lets just remain capitalists, OK? Corporations pay tax on domestic earnings, to US, Foreign earnings, pay tax to country in which it was earned. Near the end of the article . all has been disavowed; as, “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”. So, the market might go up, or it might go down, and then I will say I predicted that. No consensus, no direction, and don’t know to buy, or short. Just shut one eye and do what? Call Larry?

  4. Every first year economics student learns that taxes are a regressive encumbrance on every economy. So, not only is tax reform needed to improve the market, but also to encourage corporations to invest more in their U.S. business and not overseas. I also think a simple program could be created by the Trump administration that would really drive investment in America much, much higher. It should be a tactic that incentivizes U.S. corporations to bring home the more than $3 trillion stashed overseas. For instance, Congress could establish a plan that allows businesses to bring back the entire $3 trillion tax free, but with some interesting twists. One-half of the amount must be invested in U.S. infrastructure bonds ( say 20 to 30 year bonds) to rebuild our country’s infrastructure. The other half must be invested in business plant and equipment in the U.S.. It could also be used for new job creation, but could not be used to pay any officer or employee salaries or bonuses above a set level, e.g. people earning more that $200,000 per year would not receive one penny. A strategy like this could really be catalyst to stimulate our nations economy and make America great again.

  5. I noticed that the uranium sector was very strong today (Thursday), so I’m wondering if Mr. Trump may make a statement tomorrow about being in favor of nuclear power. If so, URA should do well.

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