Clinton Scenario But Trump Portfolio
In several interviews before and after the election, I offered that stocks would decline 3-6% on a Trump victory and a better buying opportunity would come towards Thanksgiving. At the overnight lows as election results were being reported, stocks were 5%. That’s not how I envisioned the pullback occurring, but it did. I certainly did not see the market forming a low overnight and then rallying 8% like a rocket taking off. Overall market directional behavior last week was conforming to my Clinton victory scenario more so than my Trump one with stocks continuing to advance for a day or two before the rally peters out.
If you watch the stock market on a regular basis, you probably noticed some of the most vicious sector rotation during a rally of all-time. Investors clearly had their Clinton portfolios invested before Election Day. The past few days have seen banks, healthcare, biotech, homebuilders, industrials, materials and transports soar while semis, software, telecom, REITs, staples and utilities have either closed down a little or outright collapsed.
My interpretation is that investors viewed a Clinton victory as a continuation of Obama’s economy, only slightly slower. They are viewing a Trump victory and agenda as very pro-growth with individual and corporate tax cuts, repatriation of corporate cash overseas, infrastructure and defense spending along with the potential for higher budget deficits all leading to strong GDP growth for the economy.
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