Yahoo Finance Why betting on the Trump trade is a real mistake
If you’re among investors hoping for a robust return of the Trump trade, it might be wise to hold off for a while and stay disciplined.
“People are way too bullish on Trump at this point,” Tastylive founder and CEO Tom Sosnoff told Yahoo Finance Executive Editor Brian Sozzi on his Opening Bid podcast (see the video above or listen here).
Those jumping on the Trump trade bandwagon are “making a huge mistake,” Sosnoff added. “This thing is going to go back and forth” and could be a money-losing trade, Sosnoff warned.
The Trump trade is a market phenomenon where investors bet on possible benefits (see: lower taxes, fewer regulations) of a Trump presidency.
Technology and finance were two sectors that flourished during Trump's first term, as did industrials and energy as he passed tax cuts and focused on domestic energy production.
During Trump’s term, between 2016 and 2020, the S&P 500 rose by over 50%. The tech sector rose well over 150%, and consumer discretionary rose over 103%. Individual winners were many, chief among them chip player AMD (AMD), which rose 1,000%. Apple's (AAPL) stock advanced more than 365%.
A second Trump presidency could bring a favorable environment for industries such as clean coal, nuclear energy, fossil fuels, consumer finance, and the defense sector, according to Isaac Boltansky of BTIG. Think of a broadening of the old Trump trade.
On the flip side, a Democratic victory looks to favor green energy, global trade, and the defense sector, among others.
“All else being equal, the US economy has continued to grow no matter who controls the White House,” wrote Boltansky in a note to clients.
Political headlines have flown fast and furious over the past two weeks, with an assassination attempt, returning COVID-19 reports, President Joe Biden's decision to not seek reelection, and Kamala Harris's rise.
In the wake of the assassination attempt, private prison and gun stocks went up, while Trump Media and Technology (DJT) enjoyed a bounce as well.
The Trump trade in full effect.
If buzz and headlines make investors dizzy, it’s understandable. Still, “it’s not so much about the news,” said Sosnoff, a former CBOE floor trader and founder of trading platform Thinkorswim. “It’s about how the markets are reacting to whatever’s happening.”
Instead of trading “the political house of cards,” he said, “I would just trade as you would normally trade.”
Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled, market-focused conversations and chats with the biggest names in business on Opening Bid. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
In the below Opening Bid episode, longtime NYSE floor trader Peter Tuchman shares his top advice to his fellow trading community. One reminder: Trading isn't a game.
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