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What to Expect from the Markets Under President Trump

Posted by WrapManager's Investment Policy Committee
January 19, 2017

Election.jpgOn January 20, President-elect Trump will become President Trump. If his campaign rhetoric plays out, we should expect many changes to government and the rules that govern business. Trump has vowed broad-based tax reform, a repeal of executive orders and a roll back of financial, healthcare, and energy regulations (amongst many other things).1

For investors, the election alone does not change the investment landscape – it’s about what happens next. No matter what your political views, it is important to stay attune to policy proposals that surface after the inauguration, and track their progress through the halls of Congress. If that seems like a lot to take-on, don’t worry – WrapManager is here to help! 

But First, A Look at Stock Performance Following the Election 

Much has been made of the “Trump rally” in the weeks following the election, perhaps as investors start to price-in growth expectations from new fiscal stimulus (infrastructure spending), lower taxes, and looser regulations. Oil and gas drillers on the S&P 500 surged in the weeks following the election, having risen 35% through mid-December. Banks and construction firms were not far behind, both climbing over 20% over the same period. To note, those sectors are ones that investors believe may be directly affected by Trump’s proposed policies and spending plans.1

There are also some notable historical patterns that have occurred in the first 100 days of a presidency. According to analysis published by Forbes, since 1993 it is ‘old economy’ stocks like materials, financials, and energy drillers that have outperformed. ‘New economy’ stocks like information technology, telecoms and healthcare have tended to decline, but overall the S&P 500 has gained +0.75% on average in those first 100 days. If the post-election trend holds up, history could very well repeat itself.1

Tracking Policy Under the Trump Presidency

As mentioned, it is not the election alone that changes the economic or investment landscape – it’s policy that matters. History tells us that sweeping promises made on the campaign trail are often watered-down and negotiated in the halls of Congress before they actually become law. With Trump in the White House and a Republican controlled House and Senate, however, it is reasonable to expect that a lot may get done at the outset of 2017. 

Here are a few key factors to watch:

Regulatory Environment – Trump has vowed to reverse executive orders and pursue other policies that would loosen the regulatory environment for financial and energy companies. Both sectors have done well since the election, and may continue to do so if Trump implements policy that makes it easier to do business (for better or worse).

Corporate Tax Rates – The US is now the least competitive country when it comes to tax treatment of corporations. As the other OECD countries have lowered their tax rates, the US has held steady. Republicans are seeking to change that status. They are pushing for the lowest corporate tax rate since 1939, and their hope is to go beyond just a rate cut and accomplish corporate tax reform.2

Fiscal Stimulus – Trump has stated several times his goal to invest in the infrastructure of America, from roads to airports to his plan of constructing a wall on the Mexico border. It is not yet clear how the government intends to pay for these projects, especially with a proposed tax cut on the table. But infrastructure build-outs could boost energy and infrastructure companies, as well as adding a modest bump to GDP.

Stay Up to Speed with Policy Changes by Speaking to a Wealth Advisor

The first 100 days of the new presidency will be interesting, to say the very least! There is not likely to be a dull moment in politics under the new administration, no matter what your views. Our Wealth Managers are resources for you to discuss what is happening on the policy front, and how that might affect your investment strategy and the outlook for markets. To team up with a Wealth Manager and have a sounding board for your thoughts and questions as policies change, just give us a call today! You can reach us anytime during the week at 1-800-541-7774 or you can always start a conversation over email at wealth@wrapmanager.com.



1. Forbes

2. Strategas


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