Less than three weeks ago, Donald Trump became the president-elect despite a nearly unanimous opinion by all major polls and news organizations that he had no chance. So here we are, listening to the news reports on the comings and goings around President-elect Trump.
It also was widely expected that the election of Donald Trump would be followed by a sharp decline in stock prices, but instead we are coming off of a 1,000 point rise in stock prices as measured by the Dow Jones Industrial Average. So much for listening to the pundits. So what has happened in the investment markets in past two weeks?
The movement in stock prices since Tuesday, Nov. 8 has been notable, specifically with regard to Trump’s campaign messages to the voters. The most dynamic rises in stock prices have been focused on small capitalization companies, mid-capitalization companies, banks, coal companies, energy exploration and development companies, shippers of liquidized natural gas and biotech stocks. This is not a comprehensive list, just the first cut of what I have noticed in the markets. Interestingly, solar energy stocks have performed very poorly, by comparison.
On the other side of the coin, those investments that have not fared well in the past two weeks include municipal bonds, and bonds in general, utilities and precious metals. So what was performing well before the election is now performing subpar and what was struggling before the election now is rising rather easily. Elections matter, particularly to portfolio managers and investors.
Of course, two weeks is not enough time to establish new trends in the overall investment markets. It is enough time to give investors and portfolio managers a wake up call. Things might be changing in important ways. Time, of course, will tell if what is going on now will carry on in the future. Much depends on the ability of the incoming administration to follow through on its pronouncements and deliver the goods in the coming months and years. It would seem that so far investors are willing to anticipate a change in government policies that favor an outcome different from that of the current administration.
As I have written before, one of the first rules of portfolio management is pay attention. Things in the markets are changing right now. Let’s see if the changes continue.
Nothing contained in this article should be interpreted as a promise or guarantee of earnings or investment results nor a recommendation for the purchase or sale of any security or sector.
