Trump-tastic trades

Stockcharts.com offers an interesting tool called the S&P Sector PrefCharts. It shows us how various sectors have performed over almost any time period you wish to examine.

Below is a chart of the past 5 trading days–from and including the November 8th election. As you can see, in the few short days since the election, only 4 of the 9 major sectors have been positive in performance. They are: industrials, materials, healthcare and financials. Incredibly, financials (right side red bar) are up almost 10% in that mere 5 day period – and industrials (3rd from left pink bar) are up over 4% over the 5 days. Yikes!!

5-days-post-election

I’m sure you are aware of why these sectors are up on the Trump-triumph. Fiscal stimulation via infrastructure spending is theoretically positive for industrials and materials.
Changes in regulatory policy for banks—along with rising rates are good for financials.  Healthcare and pharma reform should be good for healthcare.

A concern that I have for overall market health is the lack of diversification in sector performance. It’s way too early to raise any flags (after all, its only been 5 days…)—but a market rising on fewer sectors typically leads into declining breadth. Don’t mistake me – a market needs leadership, but you do want some diversification. Think of every bubble & bust cycle you have heard of-I blogged on them here -they all rise on a highly concentrated group of stocks, and crash when that group gets out of hand. Having said that, some of these sectors – such as materials and insurers (within the financial sector) are not overbought, and can even be considered “value” stocks by some metrics.  So it’s too early to make bold assertions on the strength of the post-Trump rally.

Below is a chart of the market for the 200 trading days prior to the Trump election. Note the broader diversification (6 of 9 sectors rising). While not a total mirror image of the current Trump-induced sector strength – there certainly has been a notable reversal in fortune for a few of the 9 sectors, including energy (black bar), healthcare (purple bar), utilities (orange)  and technology (green).

200-days-pre-election

Again – it’s too early to emphatically state that the market will continue to rotate into the 4 sectors noted above. Its only been 5 days- certainly too low a data sample to draw much from. But it probably wouldn’t hurt to add select positions from those sectors as opportunities present themselves. And I do think opportunities will appear within these sectors- and others. For example, I noted to Michael Hainsworth on BNN yesterday that Mexican stock FMX (which we recently traded in and out of within the  ValueTrend portfolio, and blogged about here) will be influenced by Trump’s statements going forward.  Actually, I think all sectors of the market will be influenced by his uttering’s. And that, my friends, could result in some pretty interesting times for a sharp-eyed trader.

Here is the clip from yesterday’s BNN show

 

 

3 Comments

  • Hey Keith, you mentioned on the show a Mexican stock where you said get in at $88.
    The show aired on Oct 5th, we couldn’t have got in at 88. The BNN image showed that it was recommended at a price of $94.55 and then you said sell it as its approaches 100. In the show you mention you got out at 98. That’s 3.5% return or less for us and a little risky too.

    Because the sell point was so close to the price at the time, I just dismissed this trading idea 😉

    -Bob

    Reply
    • Hey Bob–you are right–I send my picks to BNN 1-2, or 3 days prior, and the stock can move. Its crazy because I know where I want to buy- it might have happened a week before a show, then the stock might move suddenly. in trying to be timely–On the day of the show I am on the road all day–usually booked in other appointments in Toronto before hitting the studio. So I am not around to revise my picks. For what its worth, I’ve covered FMX on the blog frequently too–sometimes i can be more timely on the blog.
      Another example–I was going to put STN-T on my picks yesterday. We bought it at $29–target $34– (which was mentioned in a blog where I covered 3 sideways stocks like it and FMX)–1.5 weeks after we bought, the stock hits my target. Sold at $34. All due to the election. Couldn’t put it on a top pick on the show–it had already moved and been sold.
      Fast moving times!

      Reply
      • No problem, I know that WSP is favourite, so bought some of that a while back, sold at 47.50.

        Reply

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