If you are among the investors hoping for a solid return from Trump’s operations, it might be wise to wait a while and remain disciplined.
“People are way too optimistic about Trump right now,” TastyLive founder and CEO Tom Sosnoff told Yahoo Finance executive editor Brian Sozzi on his Opening Bid podcast (watch the video above or listen here).
Sosnoff added that those who join Trump’s business campaign are “making a big mistake.” “This is going to go back and forth” and could be a loss-making operation, he warned.
The Trump trade is a market phenomenon in which investors bet on the potential benefits (e.g., lower taxes and fewer regulations) of a Trump presidency.
Technology and finance were two sectors that boomed during Trump’s first term, as did manufacturing and energy when he passed tax cuts and focused on domestic energy production.
During Trump’s term in office, from 2016 to 2020, the S&P 500 rose more than 50%. The technology sector rose more than 150% and consumer discretionary stocks rose more than 103%. Individual winners were many, including chipmaker AMD (AMD), which rose 1,000%. Apple (AAPL) stock gained more than 365%.
According to Isaac Boltansky of BTIG, a second Trump presidency could create a favorable environment for sectors such as clean coal, nuclear energy, fossil fuels, consumer finance and the defense sector. In other words, an expansion of Trump’s old business.
On the other hand, a Democratic victory seems to favor green energy, global trade and the defense sector, among others.
“All else being equal, the U.S. economy has continued to grow no matter who controls the White House,” Boltansky wrote in a note to clients.
Political headlines have flown fast and furious over the past two weeks, with an assassination attempt, the return of COVID-19 reports, President Joe Biden’s decision not to seek reelection and the rise of Kamala Harris.
In the wake of the assassination attempt, private prison and gun stocks rose, while Trump Media and Technology (DJT) also experienced a rally.
Trump’s trade in full effect.
It’s understandable that headlines and noise can overwhelm investors. However, “it’s not so much about the news,” said Sosnoff, a former CBOE floor trader and founder of the trading platform Thinkorswim. “It’s about how markets react to what’s happening.”
Instead of negotiating “the political house of cards,” he said, “I would simply negotiate as I normally would.”
Three times a week, Yahoo Finance’s executive editor Brian Sozzi Information-packed, market-focused conversations and talks with the biggest names in business at Opening offerFind more episodes on our video center. Look in your preferred streaming service. Or listen and subscribe at Apple Podcasts, Spotifyor wherever you find your favorite podcasts.
In the Opening Bid episode below, Peter Tuchman, a veteran floor trader at the New York Stock Exchange, shares his best advice with his fellow traders in the trading community. A reminder: trading is not a game.
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