Could Trump Trades Still be on the Table?

The market has been up significantly since Trump won the election and the S&P 500 Index is at a mind-boggling valuation. The S&P 500 Index’s market valuation reached over $20 trillion on February 13, 2017, and the market is at all-time highs. Now, this was primarily driven by Trump and his move to potentially cut taxes, and the POTUS has a ‘phenomenal’ tax announcement within the coming weeks. That’s great news for many companies, as they would be able to potentially increase their earnings, which could continue to fuel their stock prices. Trump’s tax plan isn’t his only proposed change that has been pushing the markets higher, there are some industries that have benefitted from the potential change in the political landscape.

Banking Industry

It goes without saying, many banks and financial services firms do not like the increased regulations due to the Dodd-Frank Act, which imposed some rules to protect investors after the financial crisis of 2008. Trump has been looking to decrease regulations in multiple industries, the financial services being one of them. This is music to financial services companies’ ears.

In early February 2017, Trump ordered a review of Dodd-Frank Act rules and aims to scale back many regulations, which would benefit the financials industry. However, Federal Reserve Chair Janet Yellen is largely against this move. When speaking on Trump’s comments on the Dodd-Frank Act, Yellen stated, “I see well-capitalized banks that are regarded as safe, strong and sound.”

According to trader Jason Bond, “Trump’s proposed corporate tax plan could help multiple industries increase their earnings. Moreover, the President’s potential move to decrease regulations and rollback some expensive regulations could continue to push financials. The Financial Select Sector SPDR Fund has already been up 10.10% over the past quarter and nearly 50% over the past year, and it could continue higher.”

Now, Gold Sachs climbed to a record high, after market participants placed bets on the stock because of President Trump’s potential changes, which would increase trading activity and deal making. Moreover, the potential tax cuts and removal of some costly regulations removal should continue to push the stock higher. This theme is inherent across many financial services firms, and market participants may want to keep an eye on stocks in this sector.

Energy Industry

President Trump is also looking to increase activity in the traditional energy industry. Trump has indicated that he does not believe in global warming and even stated it was invented by the Chinese. Now, whether you believe in global warming or not, Trump’s statements have had a large impact on the energy industry. Trump has stated environmental regulations are “out of control”, and the President has already moved to rollback some environmental regulations, which could be a sign that he’s supporting the traditional energy industry.

Now, Trump recently removed the rule for anti-corruption in the energy industry, using the Congressional Review Act to kill the rule that required oil, gas and mining companies listed on U.S. stock exchanges to disclose the amount they pay foreign governments. With this deregulation, there could be increased activity in the industry, potentially increasing profits for energy companies.

The Bottom Line

The Trump trades are still on the table, and the banking and traditional energy industries could still benefit from potential deregulations and tax cuts. However, the financial services and energy industries aren’t the only ones that could rise under the Trump administration. That being said, market participants may want to keep an eye out on these two industries for now since they’ve been showing strong performance so far since Trump’s election win.

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