US citizens elected to send Donald Trump back to the White House for another 4 years this week. He will have a Republican Senate with him for at least 2 years, and possibly a Republican House of Representatives as well.

It can be tempting to read the tea leaves and pick sectors or companies that are expected to outperform under a new administration, but history has shown that the markets aren’t that simple.  We only need to look back to Trump’s first term to see a clear example.  After his surprise election in 2016 it was energy stocks that were picked to do well under his administration – “Drill baby drill!”  Big tech companies were expected to be under pressure as investors feared they would suffer under President Trump’s scrutiny.

As you can see, energy stocks were the only negative sector under Trump’s first term while tech companies led the market.  Then, after President Biden was elected, the mood turned sour for the energy sector as President Biden’s campaign promoted a green energy transformation.  Consumer discretionary stocks were picked as likely winners under a Biden administration as consumers were being showered with covid stimulus and encouraged to spend to support the economy.  Again, just the opposite was true under his administration as energy has outperformed even red-hot tech companies while the consumer discretionary sector is in last place.

While leadership in Washington is clearly a factor in the performance of the economy and the markets, there are many more variables at work that make forecasting winners and losers very difficult.

 

Have a great weekend.

 

Jack C. Harmon II, CFP^®, CIMA

Principal, Harmon Financial Advisors

Registered Principal, Raymond James Financial Services

 

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