Wow, the ultimate outsider has been elected as the next U.S. President!
Against all odds, which were based primarily on a lack of support from old-guard members of the Republican Party, relentless attacks from the mass media and cheating by moderators in the presidential debates, Donald Trump was elected on November 8 as the 45th President of the United States.
In addition to winning the electoral-college vote in traditional red states, Trump also won the vote in several blue states, including Michigan, Pennsylvania and Wisconsin.
Although the so-called political “experts” were stupefied by Trump’s victory, I wasn’t the least bit surprised with the election results, as I had predicted in a video that I did on May 26 that Trump would win the election.
And, I said in a Weekly Commentary that I wrote on June 22 that Trump would likely do so by winning the electoral-college vote in the typically Democratic-leaning states of Michigan and Pennsylvania, as well as in the often highly-contested battleground states of Florida, Iowa, North Carolina, and Ohio. And, that’s exactly what happened on November 8.
As I had also expected, stocks sold off sharply in the futures markets during the late hours on election-day, and during the early morning hours on the following day, after poll results indicated that Trump would win the election – on fears that a Trump Presidency would bode poorly for the future direction of the worldwide economy and stocks.
However, stock futures rebounded after Trump gave a very conciliatory acceptance speech at around 3:00 am on Wednesday, November 9.
And, stocks continued to move higher throughout the trading day on November 9, as well as on the following day, with the Dow Jones Industrial Average rising by 475 points (2.6%) and the S&P 500 Index advancing by 1.3%, as compared to their closes on November 8.
Looking forward, I expect stock prices, in general, to trend substantially higher than their recent levels during the year ahead. However, my research indicates that stocks will pull back a bit over the next couple of months. That forecast is based primarily on the following:
- I expect private equity funds to sell a significant portion of their publicly-traded stock holdings over the next few months in response to Trump’s proposal to eliminate the carried-interest tax provision for businesses organized as partnerships – for private equity funds to be taxed at a 33% ordinary income rate under Trump’s tax proposals instead of the 20% capital gains rate at which they’re currently taxed.
- I expect other institutional investors to also reduce their stock holdings on fears that Trump might persuade the U.S. Congress to enact laws that would inhibit foreign trade and therefore reduce the revenues and earnings generated by large, publicly-traded companies.
- I expect the U.S. economy to continue to grow at a slow pace over the next 3-6 months.
- I expect the economy to begin to expand at a rapid rate during mid-2017 on expectations that the U.S. Congress will enact Trump’s tax proposals, and for the economy to continue to grow at a fast pace over the ensuing 2-3 years if Trump’s tax proposals are enacted.
- I expect U.S. investments in infrastructure projects to increase substantially under a Trump Presidency.
My research indicates that stocks of companies that operate in the following sectors and industries will be among the market’s better performers over the next few years: the Consumer Discretionary Sector, the Police Protection and Personal Defense Industry, and the Infrastructure-Building Industry. Those stocks include Coach (COH), Taser International (TASR), and Caterpillar (CAT),
Click here if you’re interested in learning about other stocks that I expect to perform well over the next few years.
Until next time,
David Frazier is President and Chief Market Strategist of Frazier & Mayer Research, LLC, an independent investment research firm that offers customized research and analytical services to registered investment advisors, hedge funds and high net-worth individual investors. You can check out his latest insights at: www.investorsmonitor.com.