New President, New Opportunities
January 13, 2017, 11:46 am
A little over two months ago, Wall Street was waiting with bated breath for the results of one of the most historic presidential elections in recent memory. Now, investors are holding their collective breath once again as we await the inauguration of the victor, Donald Trump.
But even once the new administration moves into 1600 Pennsylvania Avenue, there will still be questions about how this presidency will play out and its impact on the market. That’s why my co-editor Matt McCall and I are reaching out to you today. We received such great feedback from our special Election Profits Bulletin series that helped investors navigate the pre- and post-election environment. With uncertainty back in the air, we want to offer that same guidance to you.
While the rally has slowed as Inauguration Day nears, this is still a great time to be invested. Matt and I both share a bullish outlook on 2017, and any near-term pullbacks create fantastic buying opportunities in strong names that can still run higher. But you can’t let the headlines and media noise deter you, which is exactly why Matt and I are teaming up once again for another special series.
Starting today and continuing through and beyond Inauguration Day, we’ll be in touch regularly with exclusive content that gets you ready for the biggest opportunities we already see brewing. We’ll share the market sectors you can’t afford to be out of right now, as well as those we know will struggle under a Trump presidency and should be avoided. And like before, we’ll wrap up the series with an exciting members-only live event that Matt and I will host on January 25 that will get you ready for what comes next for Wall Street.
We’ll be sharing more details on the event with you soon. For now, let’s begin this series with a few predictions on what Wall Street is in for once there’s a new occupant in the White House.
Prediction #1: Foreign Profits Return to the U.S.
One of the first orders of business for Trump is giving U.S. corporations an incentive to repatriate the roughly $2 trillion in cash they’re parking on the books in overseas subsidiaries. Even if that money is taxed at 10% as the current proposals indicate, that’s an effective windfall of roughly two full years of profit for the S&P 500 coming out of the deep freeze and getting back to work. Every CEO is going to allocate the money differently: some will focus on share buybacks or extraordinary dividends to deal shareholders into the jackpot, while others invest the cash in research & development (R&D), mergers and acquisitions (M&A) or other organic approaches to growing their underlying business.
This could be the big nudge it takes to supercharge dormant innovation, boost productivity, unlock closed markets and take idling companies to the next level. And from there, lower corporate income taxes practically guarantee that profitability will keep accelerating in 2017 and beyond.
Prediction #2: Oil Stays Status Quo
Trump’s impact on oil hasn’t been talked about much, but his administration will be friendly to U.S. oil exploration and help increase supply. This should put a ceiling on oil’s current trading range between $40 and $60. On the lower end, even an “okay” global economy will be good enough to keep demand for oil high enough to maintain prices above $40. There is also support at that level because enough supply has come offline to create buyers at $40.
Contrary to the belief that the world is getting off its oil addiction, petroleum still fuels 95% of all machines used to move people and goods around the globe. Even though the rig count in the United States plummeted as the price of oil fell, production was down just 12% from its peak as technology continued to improve the sector. So with plenty of supply available and factors working to keep a lid on prices, we believe this price range will stay in place throughout next year and create some interesting opportunities for nimble investors.
Prediction #3: Volatility Will Rise – But Can Be Utilized
Regardless of which political party you fall under, there’s no question that Trump can be a disruptive force. His propensity to share his thoughts via social media can quickly shake things up, and Wall Street will not be immune to this. His “tweet bombs” have already been felt across several market sectors and he’s not even sworn in yet. Just this week, comments made during a press conference that were critical of drug pricing sent biotech stocks down 4% in a matter of seconds before the group was able to bounce off its lows.
Investors need to be prepared for above-average volatility as Wall Street will continue to hang on his every word (and tweet). However, as we talked about earlier, there are always going to be bumps along the way. Smart investors with their eyes on the bigger, bullish picture can use those dips as buying opportunities to ultimately make more money off the nervousness of those who get wrapped up in the headlines, rumors and “what ifs.”
That’s where Matt and I come in. We’ll help you tune out the noise and focus on proven strategies to navigate any twists ahead. 2017 holds a lot of promise, and we’re very excited.
We hope you’ve enjoyed this kick-off to our special series! We’ll be in touch soon with your next bulletin, where we’ll share the top sectors that are ready to take off in 2017. Thanks for reading!