The inauguration of Donald J. Trump took place earlier today. The billionaire businessman now is officially the 45th president of the United States.
This most-unlikely political triumph has already had a big influence on money, markets … and probably your portfolio.
Now we must speculate on what the investment landscape will look like next week, next month, and over the next 100 days.
Yesterday, we looked at how to get your money ready for Inauguration Day. That means getting familiar with the policy developments we need to watch, and the economic issues we need to monitor, that will tell us which way the market will trade next.
If you’re a bull, you are hoping for some regulatory rollback right off the bat. You’re also hoping to see material progress on issues such as the Obamacare repeal-and-replace … a fiscal stimulus package that includes significant infrastructure spending … and corporate tax reform.
If you’re a bear, you’re anticipating the Trump/Republican pro-growth agenda will run into bigger roadblocks than anticipated. And that could mean a sharp “sell-the-president” move in stocks.
Today, we’ll look at the specific sectors to consider if the Trump/Republican administration is executing on its promises.
We also look at the sectors you’ll want to stay far away from if President Trump gets stuck in the Washington swamp.
If the Trump/Republican agenda gets executed on — and particularly his promise to slash corporate taxes — then the market is likely to validate the initial post-election “Trump bump” that sent stocks soaring from Nov. 9 until the market stalled in mid-December.
Yet the market isn’t likely to move up en masse.
Certain sectors will likely be better places to be than others. And, certain asset classes are going to be better than others.
And the bull winners are …
Cyclical stocks such as banks, financials, industrials, defense, energy, consumer discretionary and technology.
We also will likely see a continuation of the stronger U.S. dollar relative to rival foreign currencies such as the Japanese yen and the euro.
Weaker currencies in Japan and Europe are positive for stocks in those respective regions, and that means Japanese and European markets could also get a boost.
Here’s the short list of Exchange-Traded Funds to put on your watch list. I’m including charts of those I am watching most closely in this group …
SPDR S&P Regional Banking ETF (KRE)
SPDR S&P Bank ETF (KBE)
Financial Select Sector SPDR ETF (XLF)
Industrial Select Sector SPDR Fund (XLI)
iShares Transportation Average ETF (IYT)
iShares U.S. Aerospace and Defense ETF (IYT)
PowerShares Aerospace & Defense ETF (PPA)
Energy Select Sector SPDR (XLE)
Vanguard Energy (VDE)
Consumer Discretionary SPDR (XLY)
Vanguard Consumer Discretionary ETF (VCR)
Technology Select Sector SPDR (XLK)
Vanguard Information Technology ETF (VGT)
First Trust Dow Jones Internet Index Fund (FDN)
iShares MSCI Japan ETF (EWJ)
WisdomTree Japan Hedged Equity Fund (DXJ)
Vanguard FTSE Europe ETF (VGK)
WisdomTree Europe Hedged Equity Fund (HEDJ)
PowerShares DB US Dollar Bullish ETF (UUP)
ProShares UltraShort Euro (EUO)
ProShares UltraShort Yen (YCS)
Now you know what funds to put on your watch list if the Trump agenda plays out the way the president and Congress want it to.
Yet what happens if the Trump/Republican agenda hits the Washington wall, and gets stuck in the bureaucratic muck that is national politics?
We would almost certainly see a sharp reversal of the post-election rally. That means nearly the reverse of the bullish winners we just outlined.
And the bear winners are …
If the bears wrestle control away from the bulls post-inauguration, then you’ll want to be in defensive stocks instead of cyclicals.
It also means being in inverse funds pegged to the S&P 500, Dow and Russell 2000, as well as being on the opposite side of the rising dollar trade.
Utilities Select Sector SPDR ETF (XLU)
Consumer Staples Select Sector SPDR ETF (XLP)
Short S&P 500 ETF (SH)
Short Dow 30 (DOG)
Short Russell 2000 (RWM)
PowerShares DB US Dollar Bearish ETF (UDN)
CurrencyShares Euro ETF (FXE)
CurrencyShares Japanese Yen ETF (FXY)
If you want to be prepared for whichever direction the Trumpian winds of change blow, then this list represents a great start.
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.
Good luck and happy investing,
Uncommon Wisdom Daily