Parsing the Investment Implications of Trump's Presidential Win
Our initial thoughts on the market and the portfolio after Trump's win and as we wait to see how the House shakes out.
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The election results for 2024 point to Donald Trump as the 47th President of the United States with Republicans winning the Senate. We’re still waiting for the outcome of the House races but results so far show Republicans leading 197 over 177 for the Democrats. That outcome will determine whether Trump and the Republicans have a clear policy road or potential gridlock.
The market’s initial response is a pop in equity futures, but the 10-year Treasury yield is also moving higher this morning as the Fed kicks off its two-day policy meeting and the Volatility Index (VIX) is falling back to levels we haven’t seen since late September.
Helping lift the market is the expectation that the 2017 tax cuts will be extended and the prospects for less regulation. That is helping lift a number of our holdings, especially Bank of America BAC and Morgan Stanley MS. Other aspects of the “Trump Trade” are also moving higher, including fossil fuel companies, pharmaceuticals, and prison companies while renewables are under pressure.
While the 10-year Treasury yield is moving higher, we would not be surprised to see Donald Trump lean on the Fed when it comes to moving monetary policy out of what even the Fed has called restrictive policy levels. While Fed Chair Powell has reaffirmed the Fed’s policy independence, we also recognize his current term ends in May 2026. The question to be answered is how different President Trump will be from Candidate Trump when it comes to tariffs and the potential impact on inflation.
This means watching policy development under Trump and Congress, and how that may differ from Trump’s campaign comments. We’ll also be following to see if Elon Musk is named "Cost Cutter in Chief" and what that could mean. How he can do that, run Tesla TSLA, SpaceX, X, and his other ventures remains a reason to think he may take more of an advisory role, but we’ll see what plays out.
Trump also pledged that if elected he would push NATO to raise defense spending to 3% of GDP from 2%. Implied in that is higher defense spending for the U.S. as its defense spending is expected to average 2.85% of GDP over the 2025-2028 time frame. We see that helping lift expectations for the defense sector and our shares of Lockheed Martin LMT.
Some Moves We Will Be Making
When equity markets open, we plan to add additional shares of Builders FirstSource BLDR coming off the company’s earnings yesterday. We will also look to add to a few other positions from our current shopping list.
For those who missed yesterday’s Office Hours, we shared that list includes ServiceNow NOW, Meta META, Waste Management WM, and United Rentals URI.
At the time of publication, TheStreet Pro Portfolio was long BAC, MS, LMT, BLDR, NOW, META, WM and URI.
