Only about a month until the presidential elections will be held in the US. Depending on the outcome, implications for stock investors and their portfolio composition could be quite different. With the clock ticking, now is a good time to look back at 2016 and to prepare for what’s in store. For my Premium PLUS members, I have dug out a very unconventional idea with the potential to realistically up to 6x in case Donald Trump does indeed win again – with very little dependence on what broader markets could do. On top, there could even be a dividend with a yield of almost 50%.
Summary and key takeaways from today’s Weekly
– It makes sense to prepare a bit for the outcome of the US presidential election.
– Under “normal” conditions, i.e. in the absence of a potential capital gains tax on unrealized losses, the markets should do well under both candidates.
– However, I think there a few aspects to consider. A potential Trump 2.0 term is likely not to be a copy of his first tenure.
To make it clear from the beginning, despite having a clear own opinion regarding politics as well as on both candidates, I am reluctant to make this a political discussion about who has the better hair cut, the friendlier smile and the likes. You won’t hear with whom I might sympathize more or not at all.
My blog is about stocks and stock investments, bringing people interested in this topic together, not dividing and seperating them. Let’s leave politics aside – where possible – and focus on what we’ve done in the past: stock picking.
However, we can’t completely ignore politics and do as if we’re in wonderland.
We need to make some thoughts to prepare in the best possible way for either outcome – this is critical to understand. I am not making any concrete predictions, nor do I intend to say what I prefer.
I’m expecting my readers to see this work as an “what if, then…” overview with a possible, but far from guaranteed outcome. As I myself like to think in scenarios when considering potential stock investments, it makes absolutely sense to not change a running system (my approach to analysis).

With that said and with less than five weeks into the elections, let’s take a look back at the famous “Trump trade” from his first presidency.
Then I’ll share my expectations for sectors which could be beneficiaries of a potential, but not guaranteed, Trump 2.0 term. I will also outline what might be different this time (yeah, we all know this quote, but seriously).
You’ll also read what I’d avoid, at least for the time being.
My Premium PLUS members received in parallel my latest stock idea which I see as one of the by far biggest beneficiaries, should Donald Trump come back to the White House. My idea is highly unconventional and as a special situation will likely have very little correlation to what happens with broader markets.
I see the potential for a realistic up to 6x, given certain things happen. On top, there could even be a dividend with a yield of almost 50%.
If you counted correctly, you’ll have noticed that this is my fourth Premium PLUS idea for this year – this is correct, as I am from here on upgrading my Premium PLUS membership from three to four exclusive stock ideas annually. At no further cost for all existing and new members.
If you’re still not a subscribed member, now is the best time to do so (click here to become a Premium PLUS member)! Should I be right with my idea, it’ll pay your membership fee for years to come.

The average total return of my best stock ideas is currently trailing the S&P500 and the Dow Jones. I remain convinced that over time my theses will result in market-beating returns.
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both as per 27 March 2024 market close – since August 2022
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Trump trades – then and now
When using the term “Trump trade(s)”, I am obviously referring to stocks which benefitted from his first presidency and which I’ll also expect to perform above average in case of a second tenure.
However, what worked then does not have to necessarily do so in the future.
Self-explanatory, bond, commodities and currency markets will also experience their own set of outcomes. However, as a stock picker, I am focussing on stock investments, despite maybe briefly commenting on the other, too.
Before I start, why am I not making it a complete guide, primarily discussing a potential Trump 2.0?
The reason is, should Harris win, I’d need to reconsider my investments and entire portfolio composition. This mainly relates to and depends on the looming capital gains tax on unrealized gains.
It’s far from certain whether it comes, what could be included and which loopholes it would offer for the most threatened. I think should it come, things could turn upside down really hard when the deep pockets get forced to sell assets in order to raise money for tax payments.
Thus, I am not speculating here, but waiting.
This might also be the reason for a potential correction into the elections or at least higher volatility due to more hedging activity.
By the way, in late August I published a stock idea for all my members (see here) about a company which is a shovel-play on exactly this – as long as there’s elevated trading activity, my pick is happy to help.

There will likely also be commonalities, not just black-and-white-type differences. I think it is not too speculative to assume that both will not reduce the federal debt problem, but rather increase it more.
Without a capital gains tax on unrealized profits – this is a big and deciding if – I’d assume stock markets in both cases to trend higher, maybe after a brief correction.
But the latter topic in case of a democratic win will determine the direction.
Under “normal” circumstances, this should lead to tax credits and bailouts for uncompetitive industries all sorts of subventions for certain sectors. Also, I think that tariffs will be implemented or increased on especially Chinese, but maybe also European imports, no matter who wins, to boost domestic companies.
I am also expecting incentives for chip producers to continue their construction activities on US soil to move away from Asian-located production facilities.
The defense sector will likely also continue to boom, regardless of who wins. However, I am not engaging in this sector, thus I’ll not comment on it further and offer no ideas.
Where I do see the biggest differences is regarding tax policies.
While Harris is an outspoken advocate of higher taxes in general, Trump in his first term lowered them. I am not expecting anything different in this regard. Lower taxes should boost especially companies with a domestic focus.
So in essence, under Trump companies with a higher value-add domestically should do better than under Harris.
And here the next difference emerges: currency.
Under Harris and a possible capital gains tax on unrealized profits it is more likely that the USD would suffer due to investors selling USD assets. Under Trump on the other hand, due to “America first”, lower taxes and higher tariffs, I’d expect the USD to trend higher with likely increasing foreign investments.
It wouldn’t be the first time. Until the 2020 panic and interest rates pushed down to zero again, the USD was trending higher.
Maybe another reason is that Trump wouldn’t be such a surprise like in 2016 for the media – he’s known now, while this cannot be said about his opponent.

Now, a bit more concrete: which sectors benefitted under Trump 1.0?
During my research, I have found a handy research paper (see here) from February 2017, i.e. a few months after the election outcome and also after the inauguration happened in January, which examined exactly that.
Which sectors in a first response from the election date until year-end 2016 did well and which suffered?

I know, a few months (performance until year-end 2016) are a very short time period. But nonetheless, a good first indicator to start with.
Among the losers were:
- apparels and textiles
- alcohol
- printing and publishing
- recreation
- personal and business services
- food products
On the other side, these sectors performed the best:
- Aircraft, ships and railroads
- communications
- Finance and REITs (the latter for a long time have been part of the finance sector)
- steel works
- transportation
- retail and wholesale
- energy
- automobiles
The most neutral with no performance was tobacco.
In case one expects prison stocks / REITs to be a good pick, a few months ago I have written about the two big private prison companies. They are not expected to do well under a democratic presidency, but interestingly, they haven’t done well under Trump 1.0, either. See my analysis here.
Painted with a broad brush regarding the chart from above, my first thoughts were that among the underperformers, primarily “boring” and also more defensive sectors were represented.
On the other side, winners were clearly cyclical companies with domestic production facilities (“America first”) as well as those with until then high tax rates, i.e. primarily finance, communications and retail with little international exposure.
A few months ago, JPMorgan published another such analysis, though with a broader macro focus and not primarily on stocks.

They begin with the correct notice that despite 18 presidential elections and 10 switches between the two big parties, the stock market represented by the S&P 500 has compounded by 9.4% p.a. since 1950.
My remark is, in the long run, stocks did well and should do well, no matter who takes over the steering wheel. It can become problematic, though, if one hits periods like the 1970s with the severe recession of 1973 / 1974 or just before the pop of a bubble like in 2000 or 2007 / 2008.
Basically, JPM says the obvious that Trump is perceived with less regulation, lower taxes and higher tariffs – all tools to boost domestic companies.
An interesting aspect from the JPM article is the separate mention of energy:
Energy: The energy sector rallied in 2016 based on optimism around less onerous regulations and more independent U.S. energy production. Eight years later, the U.S. is now the world’s dominant oil producer. While less regulation could bring even more production, an oil glut could put downward pressure on prices and negatively impact energy company earnings. This time around, the energy sector declined while Trump’s odds were increasing.
The above is followed by a chart which shows the development of oil production, clearly proving that the US opened the valve to become the by far biggest producer.

Oil prices during Trump’s first term from start to end moved higher a bit from a smidgen below 50 USD per barrel to the mid-50s before the lockdown panic hit.
The higher production was balanced by higher demand and economic activity worldwide. In essence, oil prices were range-bound.

Regarding energy, I clearly expect windmills and solar producers to suffer while “Big Oil” could hold up better, even despite not rising prices in anticipation of a more business friendly administration.
However, I am very skeptical about domestically-focussed small producers with less diversification and weaker finances. And I must honestly say, I am avoiding big US producers on purpose.
Below is an energy ETF which contains all the big US energy producers.
They didn’t do well under Trump 1.0 – even before 2020 hit.

As Trump has promised numerous times to bring energy prices down, I’d also expect drilling activity to increase.
However, this does not automatically result in a higher production output. Here is a very interesting piece from Goehring & Rozencwajg (see here) about a precedent when in the 1970s conventional energy production efforts were turned on aggressively.
What happened?
The outcome was that, despite increased budgets and drilling, the output even shrank – conventional capacities had surpassed their peak productivity and capacities.
A similar outcome is possible for the current shale production regime, as the big fields haven’t reached new highs while the last man standing, the Permian Basin, is expected to be close to its peak (see here). I must say, it reads like what we could be witnessing currently for a second time.
So energy, both oil and gas, is a bit of a wildcard, that’s why I have published reports for my members primarily about organic growth stories which can counter-balance lower prices through much higher output and also the capture of higher average selling prices like my pick to play the Argentina recovery.
My stock idea (for Premium PLUS members) is up more than 75% over the last 14 months. I expect my members to have more joy with this pick.

Regarding traditional banks and finance stocks, I’d also be cautious.
We must not forget that under Trump 1.0 we came from ZIRP (zero interest rate policy) and went into a hike cycle, though only to 2.5% at the top.

Higher interest rates means higher interest income for banks. Regional banks did okay, but not overwhelmingly.

The big banks did much better.
Now, a potential Trump 2.0 faces a much higher interest rate environment from the beginning at around 5% with peak earnings for the banks behind us, i.e. exactly the opposite situation to begin with.
Trump stressed that he’d pressure the FED to lower rates (see here). Whether he does and the FED follows, I don’t know. But the interest rate cycle tends to be more downwards, at least for the foreseeable future. This is why especially banks likely won’t experience the twin-charged tailwind of rising interest rates and lower taxes, making it unlikely to see banks perform the same way again.
Regarding cyclicals, materials and industrials, I can imagine especially those competing hard against China to benefit strongly like steel or aluminum producers, but to a certain extent also automobiles, in case electric vehicles are pushed back, respectively not promoted artificially anymore.
And given the economy holds up relatively well.
Below is a chart showing an industrials ETF with all the big names like Caterpillar (ISIN: US1491231015, Ticker: CAT) or GE Aerospace (ISIN: US3696043013, Ticker: GE). In absence of a big recession, these names should continue to perform relatively well.

And here materials companies.

Defense and communications should do well, either, as these two sectors will likely experience the tailwind from lower interest rates and also lower taxes. Plus, both are not much correlated with the broader economy. But as said above, defense is a sector I circumvent. Communications has too much debt and too little growth for me.
Should interest rates fall further, REITs could benefit, too.
What I wouldn’t touch are banks, wind, solar and hydrogen energy, solely domestically active energy producers, prison stocks and – at least at the moment – everything that’s economically sensitive to a high degree. Besides consumer discretionaries, I am also referring to cars in the first place.
A lot will be “let’s wait and see” when it comes to the more economically sensitive sectors, because a lot will depend on political decisions, but also the general state of the economy.
It’s maybe better not too rush to quickly into a potentially bad awakening and play more defense.
That’s why I have for quite some time written about little- to non-correlated ideas with attractive valuations to have at least a much more favorable risk and reward ratio. I do not want to get into highly- and likely over-valued mainstream stocks, the same I do not want to have a too high cyclicality with extreme downside momentum and still lofty valuations.
Need ideas?
A few weeks ago, I presented to all my members such an idea – a very boring business, however, with potential catalyst for a massive re-rating on the horizon (see here). The months before, I published other ideas.



Today, I am happy to announce my next idea – my fourth stock pick for this year for my Premium PLUS members.
Donald Trump has announced plans to privatize two almost forgotten, but infamous companies which were quasi-dead, but rescued by the government. Until today, these companies have paid billions in dividends to the government and also accumulated high reserves which are several times their equity market caps (their stocks still trade).
A full privatization would have benefits for all parties, as the government could cash out big while getting rid of a party to take care of. At the same time, the companies could come back into a less regulated environment where they are free to make own decisions, raise external capital when needed and to reward all external shareholders – which currently isn’t the case.
One of these two companies, is the choice of my latest stock idea. The potential for a re-rating is huge.

Conclusion
It makes sense to prepare a bit for the outcome of the US presidential election.
Under “normal” conditions, i.e. in the absence of a potential capital gains tax on unrealized losses, the markets should do well under both candidates.
However, I think there a few aspects to consider. A potential Trump 2.0 term is likely not to be a copy of his first tenure.
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