I wrote last week that this volatile market will settle shortly after today’s election. However, certain stock market sectors be more heavily impacted by a Trump or Clinton win.
It’s clear from Monday’s major market upmove on the heels of the FBI once again clearing Hillary Clinton of any nefarious email activity that investors feel more comfortable with a Clinton win. But even if Trump wins, I doubt the market will stay down for longer than a few weeks. As we know from recent events such as Brexit, interest rate hikes and, going back a few years back, the fiscal cliff drama, initial fears of a seemingly catastrophic event almost always settle after a week or two, once investors realize that there are still plenty of great stocks to buy even after the “catastrophic” event.
That said, while I firmly believe the market as a whole will rebound regardless of who wins, the fallout from today’s election will be longer lasting for certain stock market sectors. Since a Donald Trump victory seems to be what Wall Street fears more, in the interest of balance let’s talk about which sectors will likely react well to a Trump win.
Stock Market Sector #1: U.S. Energy Stocks
While Hillary Clinton opposed the controversial Keystone XL Pipeline, Donald Trump has been decidedly pro pipeline, saying he would “immediately approve” the project should he be elected president. His Keystone XL stance is in line with his overall stance on domestic energy production, as Trump has talked about “unleashing America’s energy potential.” That means encouraging oil drilling, streamlining natural gas and shale oil fracking, and vowing to save the coal industry.
Big oil companies such as Exxon (XOM) and Chevron (CVX) might not be affected much by Trump’s energy stance since American oil production is just part of their global growth. But pipeline operators such as Kinder Morgan (KMI) and Williams Companies (WMB) could benefit. And while coal stocks don’t seem like the smartest long-term play, if Trump wins you could take a short-to-intermediate-term flyer on mining stocks that are already trending in the right direction, like Rio Tinto (RIO) and BHP Billiton (BHP), or even a pure U.S. coal name like Arch Coal (ARCH).
Stock Market Sector #2: Steel Stocks
U.S. steelmakers such as U.S. Steel (X) have already been going gangbusters this year thanks to stricter anti-dumping duties imposed by the U.S. government. The duties prevent countries, China in particular, from overproducing steel and selling it at dirt-cheap costs in the U.S.—a tactic known as “dumping.” The tariffs are as high as 266% for Chinese steelmakers, prompting shares of domestic steelmakers such as X and ArcelorMittal (MT) to soar this year.
Though Hillary Clinton also opposes dumping by foreign steelmakers, Trump has made bringing jobs back to America (and pretty much anti-China on everything) a major focal point of his campaign. “We are going to put American-produced steel back into the backbone of our country,” he has said.
Though many of his own buildings have reportedly been built with foreign steel, the perception of Trump is one of pro-American steel, and that should help U.S. steel stocks maintain their momentum should he win the election.
Stock Market Sector #3: Gun Stocks
This is true of just about any Republican winning a presidential election. Any candidate in favor of protecting the Second Amendment, without necessarily tightening background checks, is good for the gun industry. So, if Trump wins, look for big upmoves from stocks such as Sturm, Ruger & Co. (RGR) and Smith & Wesson (SWHC) in the coming weeks.
There are other stock market sectors that would surely benefit from a Trump win today. Defense contractors (due to his desire to eliminate the military sequester on funding) immediately come to mind.
So if you’re a growth investor looking for growth stocks with huge upside potential between now and Thanksgiving, these are the sectors you should focus on in case Donald Trump shocks the world and becomes the 45th U.S. President by day’s end.