The stock market’s rally during President Trump’s first 100 days in office has been impressive, with post-election performance surpassed only by the stock market surge following President Kennedy’s election.
As President Trump enters the next phase of his presidency, however, questions abound about the future of investments, the economy, and the country under the not-so-new administration. SageVest Wealth Management offers our thoughts on portfolio positioning under Trump, sector winners and losers, and how investors should expect the unexpected.
Portfolio Positioning In A Trump Presidency
If there’s one thing certain about President Trump, it’s his pro-business perspective. His focus is on boosting business and stimulating growth through measures like job creation, reduced regulation, and tax reform. From this standpoint, there’s a strong probability that equities will continue to prosper, giving reason for investors to hold meaningful stock market exposure.
However, before you become overly exuberant, it’s important to remember that no President can single-handedly implement policy objectives. In the last 100 days, we’ve already witnessed how political challenges can impact the markets e.g., the early defeat of the replacement healthcare bill caused markets to briefly retreat as the Trump agenda was called into question.
The markets have since hit new highs with a renewed era of business optimism. Ultimately, we expect a strong pro-business environment to emerge and sustain for a period of time, while remaining mindful that outcomes are not certain, nor is the journey that we will follow in the markets along the way.
Investment Sector Winners And Losers
Prior to President Trump’s election, there were numerous predictions of which sectors would flourish and which would suffer. While some were accurately predicted, such as health care and consumer discretionary spending, we find that the most interesting point of note is that many were not.
For example, energy was expected to rally, given more lenient environmental policies and more aggressive business interests, but energy investments have languished. Likewise, financials were expected to do well in a looser regulatory environment, and did immediately following the election, but have since been largely lackluster during the initial months of 2017.
Beyond sector bets, inflation was expected to emerge in a stimulatory environment. Similar to the financial sector, we saw an immediate upswing in interest rates, but they have since declined, which is counterintuitive to a potentially inflationary era.
Perhaps what’s most interesting is that nothing has dramatically changed since President Trump’s election to explain the difference between predictions and reality. This supports our ongoing advice that trying to predict or game the markets can be a fool’s game.
Potential For Increased Investment Volatility With Trump
The investment markets have been generally upbeat, with only one notable pullback since President Trump’s election. This is positive news, as is our overall investment stance as we generally favor equities. However, we also feel it’s important to forewarn investors that volatility could ensue for a variety of reasons.
President Trump’s impetuous nature and lack of political experience are certainly worthy of consideration. We seem poised to enter an era of political posturing, debates and standoffs, both domestically and abroad. Any one of these events has the potential to result in a market backlash.
Perhaps what’s most notable is the fact that our current bull market recently celebrated its eighth birthday. This is impressive in the history of bull markets, but also foreboding, as no bull market lasts forever. This factor, combined with fairly lofty stock price valuations and the potential volatility of Trump’s presidency, all bring our optimism back to reality, remembering the core principles of investing.
As a reminder, those include aligning your investment decisions with your personal income needs, your investment objectives and your individual risk tolerance. Further reminders include that chasing returns and trying to time the markets can prove to be a dangerous and costly game.
SageVest Wealth Management believes in strategic positioning based upon market fundamentals. We always remain abreast of changes in investment, political, economic and other variables that could have a bearing upon your investments. We also take the time to plan for your future, helping you determine a long-term investment objective that’s best suited for your investment needs and goals. Please contact us to discuss further.
