It was supposed to be chaos if Donald Trump was elected president. Hillary Clinton was the most market-friendly candidate. She was a known factor, while The Donald was seen as unpredictable. Analysts predicted the S&P 500 would drop 50 percent with a Trump victory, yet markets rose UP on Tuesday. How was everyone so wrong? And what can we expect moving forward?
Markets Surprise Everyone After Donald Trump Elected President; Here’s What’s Next
The entire world watched, most shocked, as Donald Trump somehow won the Oval Office and was determined the 45th President of the United States of America. Markets do not like uncertainty. S&P and Nasdaq futures fell 5 percent overnight. Markets in Japan followed suit. The world was unsure what to expect.
Then Wednesday’s trading happened, and the world didn’t end…
So why did stocks finish higher after everyone predicted the exact opposite?
To put it simply, everyone caught their breath, analyzed what had happened, and looked forward to what can come next with President Trump in office. Investors began digging into Trump’s promises and trading accordingly. The sectors which turned in the best performances of the day reflect the industries most likely to benefit under Trump.
For example, drugmakers. These companies would have come under heavy fire from a Clinton presidency, as Clinton has indicated the likelihood of price controls. Pfizer, Inc. (PFE) shares finished the day UP more than 7 percent and should continue seeing solid gains under the new administration.
On the other hand, hospital operators suffered the opposite effect. One of Trump’s main platforms was health care. Donald Trump promised to repeal the Affordable Care Act as his first act as president. HCA Holdings dropped like a rock, with shares falling 14 percent. But more than that, with Republicans holding not only the presidency but control of congress, as well, health care stocks should be worried, and investors should stay far away from buying any.
If President Trump comes through on his promises, investors can expect more infrastructure spending, tax cuts, and lighter regulation, all of which he says will benefit the economy. Investors should focus on the infrastructure spending. Construction stocks could be a major winner under Trump, with shares of Caterpillar (CAT) surging UP almost 8 percent. Domestic steel companies are a great bet here, too. United States Steel Corp. (X) rose another 17.18 percent Wednesday (though that could also be attested to a US probe of Chinese steel).
It seems former Rep.Art Laffer is right after all. Watch his interview in Fox business news to find out!
With the Dow up 257 points, the Nasdaq up 58 point, and the S&P up 23 points, investors should feel comfortable trading in what initially looks to be a bull market for the next four years – at least off of (very) first impressions. And while there may be a good amount of volatility, traders should plan to invest in banks, drugmakers, and industrial companies, as evidenced by some of the biggest movers on post-election Wednesday.
The statements, views, and opinions of any article, contribution, editorial, or advertisement in this publication are not necessarily those of The Capitalist or its editorial staff, and are not considered an endorsement, sponsorship, or recommendation of any referenced product, service, issuer, or groups of issuers.
This publication provides general information about certain subjects, and should not be construed or taken as advice (legal, financial, investment, tax, or otherwise). Do not construe or take any information in this publication as a solicitation, offer, opinion, or recommendation to buy or sell any securities, bonds, or other financial instruments or to provide any legal, financial, investment, tax, or other advice or service about the suitability or profitability of any financial instruments or investments.
The Capitalist disclaims any liability for the accuracy of or your reliance on any statements, views, opinions, or information in this publication.
Here’s Why The ‘Cockroach Portfolio’ Is Gaining Popularity
Ray Dalio, the founder of Bridgewater Capital, calls it the “all-weather portfolio” and it’s helped his investment management firm amass roughly $140 billion in assets.
Former Libertarian presidential candidate Harry Browne called it his “fail-safe investing” portfolio. Additionally, It just had its best three-month return ever. It returned 18%, far exceeding its average annual return of 7%.
Browne’s investing philosophy was that when times are good, stocks do well. Meanwhile, bad times are good for Treasury bonds, and gold does well during stagflation. Also, cash is king during a recession or crisis.
Since we don’t know what the future holds, Browne advocated for putting 25% of your portfolio into each asset class. He also suggests being prepared for whatever comes. With bonds, gold, and Treasury’s in your portfolio, you’ll underperform during a bull market. However, you can more than make up for it by softening the blow during a down market.
The “Cockroach” Portfolio
Back in 2012, Dylan Grice, a former strategist with SG Securities, called that type “the cockroach” portfolio. He dubbed it as such due to its ability to survive anything thrown at it.
“What I like best about cockroaches,” wrote Grice, “isn’t just their physical hardiness, it’s the simple algorithm they use to survive. According to Richard Bookstaber, that algorithm is ‘singularly simple and seemingly suboptimal: it moves in the opposite direction of gusts of wind that might signal an approaching predator.’ And that’s it. Simple, suboptimal, but spectacularly robust.”
Grice has calculated that for long-term investors, this type of portfolio has done at least as well as the traditional 60/40 stock and bond mix since the early 1970s. But most importantly, it managed to avoid any massive drawdowns.
And just like cockroaches, your first job is surviving as an investor, says Groce, while prospering is job number two.
A Similar Approach
Fortunately for investors who are looking for this type of portfolio, an ETF has recently launched that follows the same approach as the “cockroach” portfolio.
It’s called The Advanced Research Investment Solutions Risk Parity ETF (RPAR) and was launched last November. Alex Shahidi, the managing partner and co-chief investment officer, says they’re up to $620 million in assets so far.
He says the ETF has returned 12% so far this year compared to 1% for the S&P 500.
Most importantly, during the crash in March it fell just 15%, less than half of the drop in the S&P 500.
According to Shahidi, the fund is 25% stocks, 15% industrial commodities, 17.5% gold, 20% long-dated Treasury inflation-protected securities and 42% long-term Treasury bonds. Total exposure to the market is 120%, because the fund is 20% leveraged.
The stock mix is half U.S. and half overseas stocks, with the overseas portion tilted toward high volatility emerging markets.
Nobody knows what the market will do next, so Shahidi says you want to be prepared for any outcome. “You want to be diversified to (different) economic environments,” he added.
He did say that “If I had to pick an asset class for the next 10 years, it would be gold.”
How To Buy Gold For Your Investment Portfolio – Part 2
Yesterday was part one of buying gold and silver coins for your investment portfolio. With gold and silver both on a hot streak, investors are looking for the fastest way to gain exposure to and buy precious metals. You must be prudent and exercise caution so you don’t make a mistake and find yourself with a bad investment.
Do: Buy Gold With Your Savings
Don’t borrow money to buy gold. Use your savings so when you take possession of your gold, it’s yours without any claims against it. With volatile gold prices, you don’t want to be paying back a loan on your gold if the price suddenly dips.
Don’t: Buy Gold With Credit
The current financial system is built on fiat currency and debt with dollars being printed out of thin air. The reason to own gold is the opposite of that. So to purchase gold by using the system it is protecting against defeats the purpose of owning gold. Just use your savings and own your gold outright from day one.
Do: Store Coin Nearby
If a crisis hits and you need access to your gold, you don’t want to be out in public trying to retrieve your gold. So whether it’s in a small safe hidden in your house or buried in your yard, keep your gold nearby for easy access.
Don’t: Store Coins In a Safety Deposit Box
Storing your gold at a bank sounds like a safe decision. But it’s a bad idea for a few reasons. The first is that if there were ever a crisis, you have to go to the bank to retrieve your gold. That assumes the banks will be open during a crisis. Then you have to get access to your safety deposit box, retrieve your coins and safely get them home. That’s a lot of things that need to go right during a crisis. Additionally, gold has been confiscated before. Here in the US, gold was confiscated in 1933 under Franklin Roosevelt. If it were to happen again, gold stored at home, where there is no record if it, is much safer.
Do: Only Invest With Money You Don’t Need For Awhile
Nobody knows when inflation will hit, or the dollar will collapse, or when gold prices will finally take off. But we aren’t trying to time any of those occurrences. The reason to own gold is a long term store of value. So you don’t want to speculate in gold. We could see prices move higher or significantly lower. But long term, history has shown that gold prices steadily march higher as the dollar steadily declines in value. So when buying gold, make sure it’s with money that you don’t need in an emergency. We suggest using savings or other funds that you don’t need to worry about getting access to for at least five years.
If you have any more questions about investing in gold, find a reputable gold coin dealer near you. They will be glad to answer questions.
Tech Companies Report Record Earnings, See $200 Billion Added To Market Cap
A day after their CEO’s spent five-and-a-half-hour-long testifying at a congressional hearing on anticompetitive practices, four of the largest tech companies in the world grew even larger after each reported strong earnings in the second quarter.
Yesterday alone, Apple, Amazon, Alphabet (Google’s parent company) and Facebook added about $200 billion to their cumulative market cap after they announced earnings. This shows just how dominant each business is. Combined the companies are now valued at more than $5 trillion.
Apple reported more than $11 billion in earnings despite shutting down most of their retail stores during the pandemic. On the earnings call the tech company reported strong demand for the smaller, lower-cost iPhone 11. It also reported a surge in sales for the iPad and Mac products.
“Mac and iPad, these are productivity tools that people are using to stay engaged with their work or stay engaged with their schoolwork,” Apple Chief Executive Tim Cook said during the call. “And we believe we’re going to have a strong back-to-school season sitting here today, it certainly looks like that.”
The company also surprised analysts during the call by announcing a 4-for-1 stock split. Investors who currently have shares will receive three additional shares for every one they own. The share price is also adjusted down to roughly 25% of the current price, helping to make shares more affordable.
Tens of millions of Americans stuck at home during the shelter-at-home restrictions. With this, Amazon was perhaps the biggest winner and reported a record net income last quarter. On the earnings call, Chief Financial Officer Brian Olsavsky said that online grocery sales had tripled in the quarter and video streaming had doubled from a year ago. The company also saw an increase in its cloud computing business.
Alphabet reported earnings and net income in line with expectations. However, it announced the tech company’s first-ever drop in revenue for display ads on Google.
“The macroeconomic environment costs by the pandemic created headwinds for our business,” Alphabet CEO Sundar Pichai said on the call, but said that indications in the third quarter are a stabilization in users and expectations are for revenue to return as well. “This was true across most of our advertising verticals and geographies. Of course, the economic climate remains fragile.”
Facebook, though, had the biggest after-hours jump in its stock price after it beat Wall Street expectations by topping $5 billion in quarterly profit. Also, Facebook said that its traffic grew during the pandemic, with more people at home online, but that the average price per ad declined due to the economic fallout of COVID-19.
“Facebook has been a lifeline of economic activity,” said Chief Financial Officer David Wehner on the earnings call. Also, the company announced $5 billion in quarterly profit.
It said that with more people at home all day due to the pandemic site traffic grew, but like Alphabet, saw a decrease in the average price per ad due to the economic fallout of COVID-19.
Investing11 months ago
How To Invest In Drones
News6 years ago
How to Invest in Graphene
News6 years ago
The Federal Reserve Is A Ticking Time Bomb
News6 years ago
How To Invest Money in Oil and Gas Today
Business12 months ago
Why is Small Business in America Dying?
Dividend Stocks11 months ago
Mcdonalds the Worst Slump in a Decade
News6 years ago
3 Reasons to Invest in the Russian Stock Market Right Now
Commodities11 months ago
Latest Update On Oil – Expected to Settle Between $45 and…