Image: Returns Following the Trump Victory

Financials: Trump’s Treasury Secretary choice Steven Mnuchin wants to repeal most of the burdensome Dodd-Frank legislation. A steepening yield curve is helping banks and may drive improved net interest margins in coming periods. Goldman Sachs is ripping higher, leading the Dow’s charge.

Crude Oil: The world is moving to a better balance in supply/demand dynamics in the energy markets. OPEC is talking, has agreed to cuts, and expectations for improved economic growth are helping energy resource pricing. High-beta companies such as Continental Resources are rallying hard.

Energy: Capital spending cuts are bolstering free cash flow in the upstream space as energy resource pricing improves. Reduced regulations could help the midstream arena, though concerns over measures of “cash flow” prevail.

Industrials: “Old” economy companies, including engineering and construction entities, are rallying on hopes for government-financed infrastructure expansion as a result of initiatives by the Trump administration. Fiscal conservatives may intervene, but large cap industrials are still healthy.

Materials: Coal stocks are jumping in light of expectations that Trump’s new policies may aid the beaten down space, but natural gas remains a lower-cost alternative. Trump’s impact on trade is driving optimism with respect to steel prices. The group remains volatile, and dividends aren’t secure.

Telecom: Top-weighted Sprint in this representative telecom ETF has been rallying hard since the election. Consolidation is brewing, and Sprint may get scooped up by T-Mobile, another top weighting in this ETF. Potential rollback of regulations could be positive.

Consumer Discretionary: Top-weighted Amazon in this representative ETF hasn’t done particularly well, but second-largest holding Comcast has surged higher as a result of the election results. Third-largest Home Depot has also done well thanks to both secular and cyclical trends.

Dividend Growth: New highs again for the dividend growth crowd as this ETF, which includes companies with consecutive annual dividend increases, continues to catch a bid. What we find most intriguing though is that the ETF is rallying in the face of higher interest rates.

S&P 500: The stock market is at all-time highs…again. Optimism about what the Trump administration might bring is the main driver, and many are pointing to reduced corporate taxes, translating to higher dividend payments, as reasons to be even more optimistic.

REITs: The 10-year Treasury yield has surged to nearly 2.5% as investors believe that Trump’s fiscal policies will drive government borrowing rates higher. The market has taken the increase in stride, and even REITs have “gone up” since the election.

Biotech: Drug pricing may not face as much pressure during a Trump administration than what might have happened under Clinton, but recent rhetoric hasn’t completely eased, even by Trump himself. Biotechs continue to trade violently, and the election did little to easy overall uncertainty.

Technology: Most of Silicon Valley had been against a Trump victory, particularly with the state of California largely driving the popular vote in Hillary Clinton’s favor. Trump’s rhetoric about China could disrupt tech supply chains, but lower taxes on bringing back foreign cash to the US could help the group.

Energy MLPs: Most of the energy MLP space is composed of midstream entities, which continue to benefit from improved credit for themselves and across their customer bases as energy resource pricing improves. A Trump administration may be the catalyst to ease regulatory hurdles on projects.

Health Care: Healthcare has faced more uncertainty as a result of the Trump election, and potential modifications to Obamacare could be disruptive. Long-term demographics play into this sector’s favor, but the ‘drug pricing question’ remains a big overhang. Generic pharma under investigation.

Consumer Staples: This steady-eddy sector is retracing a bit, largely as expected. Outlined as one of the priciest sectors in some of our prior work, money is being reallocated to higher-beta areas, namely financials and energy. This usually means pressure on conservative business models.

Utilities: The 10-year Treasury yield is wreaking havoc on the utility sector, which tends to be more fixed-income oriented than the consumer staples and REIT sectors. The group continues to trade above its long-term valuation average, and rising interest rates show no signs of letting up.

Silver: Silver had a rough month in November as investors move out of precious metals and into risk assets, namely financials and energy shares. We’re not expecting a sharp comeback anytime soon.

Gold: November was also a tough month for gold. The near-8% decline in the yellow metal was the largest monthly decline in years. Gold bugs aren’t too happy, and declines have continued.