Unless you live under a rock, you are probably aware that there was an attempt on Donald Trump’s life this week. So far, the knee-jerk reaction of many of his supporters, that the shooter was some kind of hate-filled left winger, seems to be off, as the young man involved was a registered Republican, known by many to be a conservative. It looks more like just another case of a young man who was fighting some personal demons shooting at a high-profile target, but that doesn’t mean that Trump won’t see some benefit from the attack in the upcoming election.
The shooting enables him to position himself as a hero, and the iconic picture of his clenched fist salute immediately after the attack reinforces that image. That was certainly how he was treated at the Republican National Convention this week, and most polls show him with a slight, but quite consistent lead over President Biden, particularly in the swing states that really matter in a Presidential election. So, whether you love or hate Trump, and there are very few who are in between those two emotions, as an investor, it would probably be a good idea to think about positioning for a Trump win in November.
So, what should you buy?
The first thing to understand here is that this is not your father’s Republican Party. They may still be largely funded by captains of industry and Wall Street types, but Trump is seen as standing against “the man”. That is a remarkable feat…
Unless you live under a rock, you are probably aware that there was an attempt on Donald Trump’s life this week. So far, the knee-jerk reaction of many of his supporters, that the shooter was some kind of hate-filled left winger, seems to be off, as the young man involved was a registered Republican, known by many to be a conservative. It looks more like just another case of a young man who was fighting some personal demons shooting at a high-profile target, but that doesn’t mean that Trump won’t see some benefit from the attack in the upcoming election.
The shooting enables him to position himself as a hero, and the iconic picture of his clenched fist salute immediately after the attack reinforces that image. That was certainly how he was treated at the Republican National Convention this week, and most polls show him with a slight, but quite consistent lead over President Biden, particularly in the swing states that really matter in a Presidential election. So, whether you love or hate Trump, and there are very few who are in between those two emotions, as an investor, it would probably be a good idea to think about positioning for a Trump win in November.
So, what should you buy?
The first thing to understand here is that this is not your father’s Republican Party. They may still be largely funded by captains of industry and Wall Street types, but Trump is seen as standing against “the man”. That is a remarkable feat of marketing and spin given who he is and has always been, but while things like corporate tax cuts and deregulation will still benefit big business, many of the policies he embraces are designed to help middle-class and working-class Americans, with protectionism being the most notable.
The overall, long-term impact of tariffs is questionable at best, but in the short-term, they do help domestic businesses in the targeted industries, and Trump has made it clear that he wants to help and protect traditional manufacturing industries above all else. So, it makes sense to start there, and steel is the most obvious likely beneficiary in that sector. Steel is symbolic of the industrial age and manufacturing, and the image of abandoned furnaces and closed mills is often used to represent industrial decline. As with most things in politics, it is that imagery and the perception of the public that drives policy, so while steel businesses may not actually benefit from tariffs on their products and, given that China is often one of their biggest markets and that retaliation is almost inevitable may not even want them, increased and extended tariffs on steel are probably coming if Trump wins.
Investors should take a page out of the politician’s book here and look at the short-term perception of such a policy, not its possible long-term effects, and that short-term perception will be positive. That is what happened in 2017 when Trump floated the idea of similar policies. US Steel (X), for example, more than doubled in the latter half of that year and into early 2018 as the rhetoric was ramped up, before coming back to earth with a bang in March of 2018, once the changes were actually enacted.
Figure 1US Steel (X): March 2017 to present
That “buy the rumor, sell the fact” dynamic from the last time may mute the reaction in X somewhat if similar policies are anticipated or announced, but a positive response is still likely, so that would be my first choice of a stock to buy if you expect a Trump win in November.
For the second area of investment it will once again pay to go with the obvious. Donald Trump knows his supporters and knows what they want to hear, so themes that have worked for him in the past will be repeated. One of those is support for traditional energy sources. One assumes that he will have learned a lesson from his term as President when it comes to coal. Despite a lot of promises and talking up of the industry, mine closures continued over the four years he was in the White House. We have certainly heard less about it on the campaign trail this time around. The oil industry, however, has come in for a lot of love. Americans can easily connect to the message that Biden’s preference for alternative “green” energy is costing them money. They see it and feel it every time they fill their cars at the pump. So, removing some regulations and encouraging extensive drilling is an easy message to sell.
The most talked about change so far is the freeing up of oil companies to drill in the Arctic Circle. That would bring in US companies with large holdings and reserves in Alaska, and the biggest of those is Chevron (CVX). CVX is actually quite attractive right now even without the opening up of drilling in Alaska. Their forward P/E of 12.8 is lower than, say, Exxon (XOM), and a dividend yield of around 4% is something to lock in now before the Fed starts to cut rates. Still, the main reason to buy CVX right now is if you believe Trump is in a position to win in November because they hold such big reserves in the frozen North.
Last, but by no means least, there is one stock that has been under pressure for a while that could see a big boost to its fortunes if Trump does win the election. Boeing (BA) hasn’t been able to get out of its own way of late, with scandal following scandal, and past decisions like spinning off parts maker Spirit AeroSystems looking like big mistakes. What many people forget, though, is that Boeing isn’t just a manufacturer of commercial aircraft.
They are also a big defense contractor. Around forty percent of their revenue currently comes from defense systems, and spending in that area looks almost certain to increase if there is a Republican White House. In addition, corporate culpability will be less of a focus for a Trump White House than it is under Biden. Then in the fact that at some point, Boeing’s troubles will at least be put on the media back burner, even if they don’t go away altogether and BA looks like a stock that could show significant gains following a Trump win.
There are other possibilities in a similar, defense-related vein. Axon Enterprises (AXON) is one that stands out given its role as a supplier to law enforcement as well as the military, but their P/E of 92 strongly suggests that the opportunity that a Trump win might represent for them is already thoroughly priced in. Lockheed Martin (LMT) would be another beneficiary, but that stock’s proximity to its all-time high is a bit off-putting. Overall, the depressed state of BA makes it my pick of the defense stocks.
It is a long time until November, but with the clamor within the Democratic Party for Biden to step down after a disastrous debate performance, Trump being cast as both an invincible hero and a victim, and with the polls in swing states suggesting a Trump win, it feels like a good time to prepare your portfolio for a Trump victory. That will involve more than just buying the three stocks above, but doing so is at least a good start.
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