The immediate market reaction to President-elect Donald Trump’s victory has included a surge in equities, a strengthening of the dollar, higher Treasury yields and a spike in Bitcoin and other cryptocurrencies.
Yet advisors are cautioning clients not to make any immediate adjustments to investment allocations until more clarity emerges about the administration’s top priorities around tariffs, tax policy, regulatory frameworks and who they tap for key Cabinet posts.
LPL Financial is maintaining guidance it distributed on Monday, just before the election, where it outlined potential implications for either candidate’s victory. It pointed out that stock markets often bounce around a bit in the first weeks and months after an election as policy implications become more fleshed out.
“In terms of how investors should position portfolios, we would sit tight, wait for results, and then after the fact consider some shifts within politically sensitive segments of the market such as banks, energy, small caps, emerging markets and bonds,” according to the note authored by Jeffery Buchbinder, chief equity strategist, and Adam Turnquist, chief technical strategist.
The note also pointed at some potential winners and losers in the wake of Trump’s victory. Potential winners included banks and financials, defense, oil and gas, small caps, U.S. steelmakers and Treasury Inflation-Protected Securities. Potential losers included China, Mexico, electric vehicles, healthcare, renewables and long-term Treasuries.
LPL’s strategic and tactical allocation committees “recommend investors stay fully invested at their targets for both equities and fixed income from a tactical asset allocation perspective—with potentially a small alternatives position, funded from cash, to help mitigate potential volatility for appropriate investors.”
The LPL committee also maintained its preference for growth stocks over value.
That sentiment was echoed by Ryan Detrick, chief market strategist at Carson Group.
“In the wake of the election, or any highly emotional moment (positive or negative), it’s important for advisors to keep emotions in check, whether clients are too high or too low. The reality is history doesn’t show much correlation between stock market returns and who is in the White House,” Detrick wrote in an email. “Reminding clients that the economy remains strong, earnings are at record levels, inflation is contained, and the Fed is now dovish are all reasons to expect this more than 2-year-old bull market to likely have plenty of legs left. This is what clients need to be hearing.”
Carnegie Investment Counsel’s Director of Research Greg Halter said the firm won’t offer clients a “blanket statement” regarding the election and instead is focusing on responding to market changes as they arise.
“So many times, an action has a totally unexpected reaction—positive OR negative,” Halter wrote in an email. “The U.S. economy is huge, and it is difficult to ‘turn a battleship on a dime,’ as the saying goes.”
Halter does expect the tax policy enacted under Trump’s first term that was set to expire to be extended.
“Corporate taxes are likely to go down, which will help bottom line results,” he wrote.
In addition, Halter said sectors like banking and financials are likely to benefit from less regulation, while an energy policy that encourages oil and gas drilling could boost energy companies.
But in some aspects, there are more questions than answers.
“How about tariffs—the threat of or actual? Will this hurt retail? Will this result in higher prices? Will this result in higher wages?” Halter wrote. “How about the public sector? Will the federal government be downsized? If so, what is the impact on those employees that may be out of a job?”
MFAC Financial Advisors CEO Mitchell Freedman said trying to make a “Trump Trade” or “Harris Trade” was no different from trying to time the market.
Daniel Wiltshire, an actuary and IFA with Wiltshire Wealth, said sectors like industrials and financial services could benefit from a Trump win, though cautioned that since markets adjust to new information quickly, “the opportunity to take advantage of the election result may have already passed.”
Kip Lytel, a managing wealth advisor with Montecito Capital Management, urged clients to consider overweighting sectors like traditional energy, defense, real estate investment trusts and financial stocks (including blockchain). He cautioned that Trump’s pro-tariff positions could be “hurtful to trade and the end consumer” if he was aggressive across the board.
Additionally, Charles E. Helme, a managing director with BH Asset Management, said clients worried about deficit spending and inflation should be worried regardless of the victor since both Harris and Trump ran on platforms “promising tax cuts or spending that don’t have an offset to prevent inflationary fiscal stimulus.”
Patrick Donachie and Elaine Misonzhnik contributed to this story.
