Donald Trump's election win has left many investors and financial planning clients uneasy regarding what they should do with their money now that he is in office. A recent poll by the American College of Financial Services shows that 49% of advisors are telling their clients to lock in capital gains now, shift their money into immediate annuities or take other precautionary measures in order to weather the possible economic storm that may arise as a result of Trump's policies.
But the poll also shows that 53% of advisors are telling their clients to maintain the status quo or even move more of their money into stocks or other investments. This begs the question, which path is better? (For more, see: Stocks, ETFs to Watch During Donald Trump's Presidency.)
The steps that investors should take now will depend largely on their investment objectives, risk tolerance and time horizon. Long-term investors who will not be taking withdrawals from their savings for at least 20 years can probably just stay the course and maintain their current portfolio allocation. Those with shorter time horizons can consider the following alternatives.
Ladder your bonds. Investors who have money in fixed-income securities should seriously consider laddering out the maturities in their portfolios at this point, as interest rates are most likely going to rise for the foreseeable future. Any capital losses that they sustain in the secondary market can be used to offset capital gains that they may realize from selling appreciated stocks.
Stocks and ETFs
Invest in stocks and exchange-traded funds (ETFs) that are likely to benefit from Trump's Presidency. And there are a lot of them that could soar now that Trump is in office. Several of these picks include:
- Aetna Inc. (AET): Like other health insurance companies, Aetna has struggled to make a profit under the Affordable Care Act. If Trump is able to repeal this legislation, then its profit margins could return to their previous levels and boost the stock price once again.
- Ethan Allen Interiors Inc. (ETH): Trump's plan to cut taxes for some individuals means that they could have more disposable income to buy more furniture and other consumer goods.
- SPDR Gold Trust ETF (GLD): If Trump ignites a trade war with China, then gold and other perceived safe havens may spike in price as investors move their money out of the markets.
- Alcoa Corp. (AA): If Trump imposes tariffs on the cheap aluminum that is being shipped to the U.S. from China, then it could level the playing field for companies like Alcoa, that are currently unable to compete with foreign exporters.
- Consol Energy Inc. (CNX): Consol is one of the remaining coal companies that is still standing after the price of coal plummeted by 50% from 2011 until now. Trump's pledge to revitalize the coal industry could mean big profits for this company.
- BWX Technologies Inc. (BWXT): This company specializes in infrastructure in the energy sector and also produces products for the defense industry, such as engines for nuclear submarines. Companies like this will profit substantially if Trump is able to invest in our country's infrastructure like he promised. Other major civil engineering and defense companies will also likely see increased revenue from Trump's policies.
- Biotech companies: Players, such as Biogen Inc. (BIIB) and Amgen Inc. (AMGN) may see their profits rise to their previous levels if Trump is able to repeal the Affordable Care Act and allow drug manufacturers to raise their prices again.
- Construction companies: Companies such as Caterpillar Inc. (CAT), which manufactures heavy construction equipment and cement company Cemex (CX), will be big winners if Trump succeeds with infrastructure projects like getting Mexico to build a wall between it and the U.S.
- IBM Corp. (IBM): IBM could win big if Trump ends up outsourcing a substantial portion of the government's bureaucratic operations to the computer giant.
- Financial stocks: Trump's promise to repeal the Dodd-Frank Act and the Department of Labor's new fiduciary rule will lead to fewer regulations for the banking and financial industry. The major players in this sector, such as Bank of America Corp. (BAC), will be sure to profit from any rollback in legislation that Trump is able to accomplish.
- iShares Dow Jones US Aerospace & Defense ETF (ITA): This ETF could shine due to Trump's stated intention to beef up military forces in a more economical fashion. Any major company that manufactures products for the military industrial complex may also be a good buy. (For more, see: Can President-Elect Trump Make Coal Stocks Great Again?)
The Bottom Line
It remains to be seen how much of Trump's stated policies will make it through Congress and in what form. But there seems to be a fair amount of bipartisan support for some of his goals, such as overhauling our infrastructure. Investors who are looking at how they can capitalize on the election results have several sectors to choose from. (For more, see: Boost Bond Returns With Laddering.)