Tags: Trump Administration | Donald Trump | jpmorgan | donald trump | growth | infrastructure

JPMorgan: Trump Is 'Pro-Growth' for Market, so Buy Infrastructure Stocks

JPMorgan: Trump Is 'Pro-Growth' for Market, so Buy Infrastructure Stocks

(Getty/Ethan Miller)

By    |   Friday, 11 November 2016 07:00 AM


JPMorgan told investors the market will rally into early next year due to optimism about the Republican economic agenda, CNBC.com reported.

"We interpret the U.S. election outcome with a Republican sweep as pro-growth for equities," strategist Dubravko Lakos-Bujas wrote in a note to clients Thursday.

"Expectations of decreased regulation, favorable tax reform, increased fiscal spending and less congressional gridlock should drive stronger revenue growth and higher net income margins. Further, the removal of election uncertainty and some form of cash repatriation should result in increased investment activity," the note read.

Lakos-Bujas cited how a reduction in the corporate tax rate to 15 percent or 20 percent versus the current effective rate of about 25 percent could add $10 to $15 in earnings per share to the S&P 500. As a result, he predicts the benchmark will rally to 2,300 "by early next year," representing 6 percent upside from Wednesday's close.

"Trump administration reinforces the reflation trade that started post-Brexit. We expect reflation to support rotation from Low Vol stocks, the largest beneficiaries of falling yields in this cycle, into value and growth stocks," he wrote.

The strategist said infrastructure spending is "high on Trump's agenda." Consequently, the largest beneficiaries will be domestic construction materials, metals, mining and transportation stocks.

JPMorgan isn't alone in its enthusiasm for Trump's potential

Veteran financial guru Larry Kudlow, who served as the Trump campaign's senior economic adviser, tells Newsmax TV that Trump will live up to his campaign vows to restore prosperity to all Americans and the nation we all love.

"Donald Trump has a very strong economic growth message which is going to be great for the economy and for profits and for businesses large and small," Kudlow said Wednesday to Steve Malzberg on "America Talks Live."

Kudlow, a Newsmax Finance Insider and CNBC senior contributor, said the billionaire real-estate tycoon was successful because he understands the dissatisfaction of "ordinary middle-class folk." 

"With Mr. Trump you're going to have across the board tax cuts, you're going to end Obamacare, which is a prosperity killer and a healthcare killer, you're going to take the handcuffs off of energy, you're going to wall back all these regulations and you're going to stop the government from taking over the economy. That's a powerful message," Kudlow said.

Trump "understood that they were angry and that the establishment in Washington and elsewhere was not delivering. He understood that they wanted change and he understood that they wanted to drain the swamp, get rid of the corruption, stop the corporate cronyism," Kudlow said.

"He understood that instinctively and he knew that people were not willing to give up the American dream … I think it was effective and I think he hit it exactly right. He just understood the American people in a way that no other political figure has understood it."

But the possibility of Trump slapping punitive tariffs on exports from some countries such as China has unnerved some investors. 

"The markets are adjusting to a new reality and are giving Trump the benefit of doubt," Adam Sarhan, chief executive officer of Sarhan Capital, told Reuters.

"He does have some problems with immigration and with social issues, but his economic policies, at least in the short-term, are perceived to be stimulative and net good for the economy and that's why stocks are rallying."

(Newsmax wire services and Bloomberg News contributed to this report).


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JPMorgan told investors the market will rally into early next year due to optimism about the Republican economic agenda, CNBC.com reported.
jpmorgan, donald trump, growth, infrastructure
Friday, 11 November 2016 07:00 AM
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