How should I position my portfolio now that we know that Donald Trump will be our next President?

I am a little confused on how I should position my portfolio after the election. I am of the opinion that many of President-Elect Trump’s policies will be detrimental to the economy and the stock market, but the stock market continues to outperform. Should I become more conservative in my allocation or more aggressive?

Asset Allocation, Stocks
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November 2016

To be perfectly candid, you should have had your investment plans ready ahead of the election for either outcome, so you could quickly and easily make adjustments. An easy way to do this is through Exchange Traded Funds (ETFs) to broad exposure within a sector. Both candidates wanted big infrastructure bailout, so materials and companies that do base metals and materials are great areas for exposure. The SPDR Materials ETF, ticker XLB, and the SPDR Metals and Mining, ticker XME, are solid candidates. Don't be fooled by the "metals and mining" name, look under the hood at the stocks within the ETF.  

Transportation companies broke out a few months ago as both candidates were talking about big infrastructure plans. Who is going to move all those construction materials? Transports. The iShares Transportation ETF, IYT, is a perfect way to get broad exposure in those companies. Also, banking is currently timely and very interesting due to rising rates, which makes banks more profitable. Also, Trump has vowed to ease up on regulation. The Regional Bank ETF is KRE and KBE represents the large banks. Both have shown a lot of strength. Lastly, it is likely you will see some changes in healthcare and biotech, but that is less certain.     

In full disclosure, we invested in ITY a couple of months ago well before the election and that may be slightly extended now. You may want to wait for a pullback (if we get one). We purchased the materials ETF right after the election, and the metals and mining before the election. We just added the banking ETFs early this week - half a position in each - so that it accounts for one total sector position (10%). This way, we don't have to be to smart and try to outguess whether large or regional will do better.

These sector ETFs represent around 40% along with a semiconductor ETF, the best technology space at the moment, and are what we feel will be the strongest areas. Then the remainder of our portfolio is in indexed or low volatility dividend ETFs for broad exposure coupled with a few great, large cap stocks.  

We did have a larger cash position going into election night, between 20% - 25%, depending upon the client just in case the "Trumpix" turned into another "Brexit" or worse.  But we quickly deployed the cash the morning after the election in layers over a few days. 

This is for research and to be thought provoking, not individual investment advice.  You need to make sure these ideas are suitable for you and your situation.  And please take this with the constructive criticism for which it was meant. I was trying to provide insight as to how a manager looks forward, creates, and makes adjustments to and within a portfolio. I have been surprised as often as not by what I think should be happening.  I have found "I think" and "in my opinion" are dangerous words in money management.  I want to look at the money flows and closely follow where the institutional money is going into, and more importantly, out of so I can add or subtract allocations accordingly. This will be for around half of the portfolio in sector rotation. The other half will be in broader indexed and dividend paying ETFs.

I hope this helps to stimulate your thought processes.  Best of Luck.

November 2016
November 2016
November 2016
November 2016