Tags: Traders | Trump | Stock Trades | Financials

Traders Glued to These 6 Stock Trades Heading Into Trump's Speech

Traders Glued to These 6 Stock Trades Heading Into Trump's Speech

 (Dollar Photo Club)

Tuesday, 28 February 2017 07:45 AM

While investors in every asset class will be hanging on President Donald Trump’s speech to Congress Tuesday, it’s those who have furiously bid up equities -- in hot-topic sectors like financials, retail and healthcare -- who may have the most on the line.

The oration, carrying all the policy gravitas of a State of the Union address, is expected to touch on budget goals, tax reform and trade. Considering that almost every utterance from Trump has roiled companies and industries over the past few months, swings in equities are a safe bet. Here’s what to watch:

1. Financials

Financial stocks were the big post-election winner in the S&P 500, surging 23 percent since Nov. 8, including 14 percent in November alone. Investors have been bullish on the prospect of higher interest rates and looser regulations. Trump has specifically proposed a rollback of the Dodd-Frank Act. The group slid 0.4 percent at 9:43 a.m. in New York.

2. Retailers

The industry has trailed the S&P 500 since the election, rising 8 percent versus an 11 percent gain for the benchmark. After climbing more than 6 percent in the month following the vote, retailers limped into year-end as speculation mounted that Trump would impose a border tax. Investors expect the measure to hurt profits for retailers that sell goods manufactured overseas.

3. Building and engineering companies

The stocks initially soared on Trump’s pledge to rebuild U.S. infrastructure, with companies like Jacobs Engineering Group Inc., Eagle Materials Inc. and Headwaters Inc. rising more than 20 percent in November alone. However, patience has worn thin over the past month, with a Bloomberg index of infrastructure stocks slipping 5 percent.

4. Health-care companies

Health-care stocks in the S&P 500 climbed immediately after the election on expectations that Trump and a Republican-controlled Congress would roll back regulations. Since then, industry shares have recovered from two declines of more than 3 percent and now are at the highest since August.

5. Companies with higher tax rates

A Goldman Sachs index of companies with the highest tax rates has beaten the S&P 500 by 2.5 percentage points since the election and in mid-January capped its biggest rally in about four years relative to the benchmark. Trump has suggested lowering the corporate tax rate to 15 percent from 35 percent.

6. Companies with large overseas cash holdings

Trump campaigned on a plan to apply a much lower tax rate -- 10 percent or less, as opposed to 35 percent -- to overseas corporate earnings. The companies with the most international exposure span a range of industries, including technology, consumer discretionary, industrials and energy.

The wild card: Trump doesn’t reveal policy details

Some on Wall Street think the best result for stocks would be for Trump to continue skimping on details. The more that’s left up to the imagination, the easier it is for equity investors to convince themselves to continue buying, according to Andrew Sheets of Morgan Stanley.

“You’re at the part of a policy cycle where anything is possible -- no compromises have to be made and no disappointments have happened,’’ Sheets, Morgan Stanley’s chief cross-asset strategist, said in a Feb. 24 interview on Bloomberg Television.

“In some ways the market might actually like a speech that’s a little more vague because it allows everybody to fill in the version of tax reform or tax cuts they have in mind. The more specific it gets about the potential offsets, like border adjustment tax, the more nervous the market could be.’’

© Copyright 2021 Bloomberg News. All rights reserved.


   
1Like our page
2Share
StreetTalk
While investors in every asset class will be hanging on President Donald Trump's speech to Congress Tuesday, it's those who have furiously bid up equities -- in hot-topic sectors like financials, retail and healthcare -- who may have the most on the line.
Traders, Trump, Stock Trades, Financials
582
2017-45-28
Tuesday, 28 February 2017 07:45 AM
Newsmax Media, Inc.
 
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved