A Trump Presidency – Introduction
On Tuesday, Americans made history. Two things happened. One, they elected a man who has no experience in government or military. The man defeated a person who many people expected to win with a landslide. Second, they proved my theory that there are no experts. Before the election, all the data analysts including Nate Silver of Five Thirty Eight who had a perfect record were proven wrong. Many reasons contributed to Clinton’s loss including her disconnect with day-to-day electorates. This article will not focus on the politics part but on the financial market. I will highlight a number of things to buy and those to sell during this Trump Presidency.
Before the election, the perception among the so called experts was that a Trump presidency win will lead to a recession. On Wednesday, the stock market fell briefly before surging to new highs since then. The main indices in the United States are now trading in their highs. This has been contributed by a number of things. One, investors have taken time to assess the policies to be introduced by Trump. They have seen them viable for the market. For instance, Trump has promised to reduce the corporate tax from the current 35% to a 15%. This will make the US to be one of the lowest taxed countries which is a positive for the companies. He has also promised to repeal regulations that have curtailed growth in the United States. This is also a positive to the companies. If he keeps his promises, this means that the indices will keep on going up because of the health of the companies.
The financial sector is one of the biggest gainer under Trump’s administration. Following the financial crisis of 2008, the Obama administration put in place stringent measures to prevent another financial crisis. The Dodd-Frank regulations have had huge consequences to the American banking sector. It has also made it difficult for banks to lend. Trump has promised to ease these regulations. As a result, this is one sector you should look at.
Jim Cramer developed the name FANG. FANG is the acronym for Facebook, Amazon, Netflix, and Netflix. In the recent past, these companies have been the biggest gainers in the American stock market. Amazon is now valued at more than $300 billion despite not making any significant profits. This sector has been one of the biggest casualties of the Trump administration. The fact is that the FANG companies are in a bubble right now which could burst in a few months time. Therefore, I recommend that you either short these stocks or trade them.
In the campaigns, Trump promised a trillion in infrastructure spending. He promised to build new airports, roads, ships, and military aircrafts. He also promised that these will be built using American hands. As an investor, this will be one of the best performing sectors under a Trump administration. Companies involved in infrastructure and utility will likely see huge investments. Therefore, if you are a long term investor, this is an area you should invest your money into.
During the campaigns, Trump presidency promised to renegotiate trade deals. He also promised not to sign the Trans-Pacific Partnership (TPP). He has adopted a nationalistic approach. This will have significant impacts to the emerging markets. Many emerging countries such as Mexico have gained a lot from the NAFTA agreement. A repeal of these agreements will have significant impacts to these countries. Therefore, it is a good recommendation to either stay invested in these countries. Alternatively, you can trade the countries on a day-to-day basis.
As the economy grows as a result of an improved business environment, I anticipate the dollar to remain steady. The dollar will continue to rise against major currencies such as the Mexican Peso and other emerging market currencies. Therefore, if you are a long term trader, buying the dollar and shorting gold will do you very well.