Trump And The Markets: One Year Later

By: Wayne Duggan

It’s November once again, marking the one-year anniversary of the historic 2016 U.S. presidential election. Donald Trump supporters can point to a booming economy and major stock market gains as evidence of the president’s successful first year, while detractors can highlight lack of progress on healthcare reform and tax cuts as signs of ineffectiveness. Here’s a look at what has worked for investors under President Trump, what has definitely not worked, and what questions remain unanswered heading into 2018.

What Has—And Hasn’t—Worked?

In a broad sense, stocks have worked under Trump. Since Election Day, the S&P 500 has rallied more than 20 percent, a tremendous gain for a single year. Among the SPDR sector ETFs, the Financial Select Sector SPDR Fund (NYSE: XLF), (+35 percent), the Technology Select Sector SPDR Fund (NYSE: XLK) (+33.9 percent) and the Materials Select Sector SPDR (NYSE: XLB) (+27.5 percent) are the top-performing sector ETFs in the market. These sectors have benefited from general strength in the economy, rising interest rates, corporate deregulation, talk of a major infrastructure spending initiative and the potential for massive corporate tax cuts and a repatriation holiday.

On the other hand, Trump has done little to stabilize the struggling oil & gas industry, and the global slump in oil prices has dragged on. The Energy Select Sector SPDR (ETF) (NYSE: XLE) is basically flat since Election Day. The Consumer Staples Select Sect. SPDR (ETF) (NYSE: XLP) has also lagged, gaining just 1.3 percent since Election Day. Amazon.com, Inc. (NASDAQ: AMZN)’s entry into the grocery business has weighed on food and grocery stocks dragging down the consumer staples sector.

Best And Worst Stocks

Trump may have been good for most investors, but not all of them. While the S&P 500 was soaring to new all-time highs, some of its components have been coming apart at the seams. Brick-and-mortar retailers like Foot Locker, Inc. (NYSE: FL) and Macy’s, Inc. (NYSE: M) have seen their share prices roughly cut in half over the past year as shoppers increasingly go digital. Athletic apparel giant Under Armour, Inc. (NYSE: UA) (NYSE: UAA) is also suffering from poor sales at its retail partners. The stock is down more than 55 percent in the past year.

On the other hand, semiconductor stocks riding the waves of artificial intelligence, autonomous vehicles and cryptocurrency have been some of the top performers in the red-hot technology sector. NVIDIA Corporation (NASDAQ: NVDA) has been the top-performing stock in the S&P 500 in the past year, up 200 percent. Micron Technology, Inc. (NASDAQ: MU) and Lam Research Corporation (NASDAQ: LRCX) have also more than doubled in value since Election Day.

Unanswered Questions

A year following the election, a number of questions about the Trump presidency are still unanswered. The answers to these questions could have huge implications for stocks in 2018.

Republicans just recently unveiled their proposed tax cut plan, which would cut corporate tax rates from 35 percent to 20 percent. If the bill passes, it could be a huge tailwind for U.S. corporate earnings.

In addition, Republicans have repeatedly failed to reform the struggling U.S. healthcare system or get drug prices under control. Meaningful health care legislation could move hospital stocks, pharmaceutical stocks, and insurance stocks one way or another in 2018.

Finally, as NPR recently reported, Trump has yet to provide any details on the $1 trillion infrastructure plan he repeatedly promised throughout the campaign season. Defense stocks, construction stocks and materials stocks have a lot riding on that spending plan in 2018.

And of course, 2018 is a midterm election year. Traders should expect the market to react more and more to Congressional election polling as Election Day 2018 approaches.

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