My Take on the "Trump Quake" - 1 Year Later

Just over a year ago, Donald Trump was elected the president of the United States. I called it “An epic bombshell. A massive shock to the system. [And] a wake-up call for the political elite in our nation and all around the world.”

Then I gave it an easy-to-remember, short-hand name: The “Trump Quake.”

Twelve months have passed since then. But while some of Trump’s priorities and policies have fallen by the wayside, or been waylaid by political opposition, the stock market has rendered a very clear verdict on the economic and investor impacts of his agenda (as well as favorable external trends). Since right before Election Day 2016, the S&P 500 has risen 24%, the Russell 2000 Index has climbed 27%, and the Dow Industrials have surged 34%.

That, in turn, means I was right on track when I said back in late 2016 and early 2017 that Trump’s election was an incredibly bullish development for many sectors of the stock market. If you followed my advice to embrace and profit from it in various sectors – regardless of whether you personally agreed with Trump’s politics, brash leadership style, or social policies – you did very well for yourself in the past year.

Just look at this Trump Quake ETF Screener I created using the premium tools available at the Weiss Ratings website.

You can see that in the past year, long-term government bonds would have actually LOST you money. The red ink isn’t too bad – about 1% for the benchmark iShares 20+ Year Treasury Bond ETF (TLT, Rated “C”). But that represents massive underperformance when compared to the roughly 24% gain in the SPDR S&P 500 ETF (SPY, Rated “B”).

Meanwhile, many Trump Quake sectors have beaten the market handily. The Materials Select Sector SPDR Fund (XLB, Rated “B”) gained approximately 27%, the Financial Select Sector SPDR Fund (XLF, Rated “B”) jumped 36%, and the PowerShares Aerospace & Defense Portfolio (PPA, Rated “B+”) surged 38%.

The only exception is the Energy Select Sector SPDR Fund (XLE, Rated “C”). But even energy stocks are now rallying hard, spurred on by a surge in crude oil to its highest price since the summer of 2015. I flagged this potential development back in September here.

So, with the election fading further into history, is it time to switch horses? Abandon the “growthier” investments that have been outperforming and get much more conservative? I’m always on the lookout for something that could change the trend. But my short answer is “No!”

I see three key reasons why: First, economic growth isn’t slowing down. If anything, it’s accelerating further. Second, Trump has finally presented a massive tax reform and reduction plan that contains all kinds of goodies for individuals and businesses. Third, interest rates, energy prices, and credit market trends remain very favorable.

I’m going to delve much more deeply into those trends in my November issue of High Yield Investing, which goes to press on the 14th. If you aren’t already a subscriber, you definitely don’t want to miss out. Just sign up here (or call my team at 877-934-7778) and they’ll get you up and running.

But in the meantime, the ETF Screener I just shared is a good benchmark for you. As long as the Trump Quake plays keep outperforming their more conservative competitors, it’ll tell you everything you need to know about the sustainability of this rally.

Until next time,

Mike