These Three Industries Won’t Thank Trump – But Your Wallet Will

Since what some have coined an “unprecedented” presidential election, there’s been so much information from so-called financial “experts” about how to allocate your money for the largest returns.

It’s enough to make your head explode.

What the experts neglected to tell you is how this method ultimately leaves you at the mercy of the markets.

And that’s the last place you want to find yourself…

You can control the short- and long-term future of your portfolio (and your bank account) without waiting for the next major headline. All you need are the best opportunities on stocks poised to pop or drop since Trump’s victory.

Now I already covered the “pop” part, when I showed you the three sectors that are eyeing enormous gains during Trump’s term.

And here’s the “worst performers list” – the three sectors set to drop…

The Top Three “Losers” of the Election

  1. Alternative Energy / Renewables

Trump has grand plans to make the U.S. energy-independent, including ramping up the coal industry and getting miners back to work. He’s also promised to drill more oil and increase gas development domestically. He’s said that he’s not completely against solar energy but does question how viable it is to invest in when it could take a long time to reap the rewards.

And this has shaken up the alternative energy and renewables industry, with wind and solar stocks, like First Solar Inc. (NASDAQ: FSLR) and SolarCity Corporation (NASDAQ: SCTY), taking a tumble following the election.

Now there are many alternative exchange traded funds (ETFs) that you could you trade to milk profits from the overall sector, but this is the largest (by way of total assets):  Guggenheim Solar ETF (NYSE: TAN).

Source: www.tomsoptiontools.com

As you can see very clearly in the chart above, the stock has a 200-day simple moving average (SMA). The SMA is a simple technical analysis tool that gives you the average price data of a stock or ETF over a specific time period (you can tailor it to whatever timeframe you like, making it a good tool for both short-term and long-term trades). You can calculate it yourself by adding up the prices and dividing by the number. So to find the 200-day SMA for TAN, you’d add up the last 200 prices and divide by 200. If you were looking for, say, the 50-day SMA, you’d add up the last 50 prices and divide by 50.

So if TAN crosses over its 200-day SMA, then this tells you that you’re looking at a bullish indication of where the stock will move from there and can expect higher prices to come.

But if it drops below its 200-day SMA, then you know you’re looking at a bearish indication of its future movements and can expect lower prices to come.

  1. Bonds

The bond market has taken a beating since Trump’s victory, taking a $1 trillion loss. Interest rates on U.S. bonds alone have spiked, which makes it much more expensive for the federal government to borrow money. In fact, the surge in treasury bond rates, like the iShares 20+ Year Treasury Bond ETF (NASDQ: TLT) has only happened three times in the past decade.

Now some people would have you believe that this market could be a “safe haven” for your money while all the uncertainty played out. But with Trump championing spending trillions of dollars on infrastructure and defense, among others, it clearly wasn’t. And if that spending comes from borrowing, look for continued depression on bond prices and higher interest rates to come.

TLT tracks the overall U.S. bond market is doing. And as you can see since election day, it isn’t pretty…

PPT-2

Now you could consider trading put options on this ETF or finding more liquid stocks within this sector for put trades. But I would not suggest shorting this market because it could be too costly and you may not have the clearance from your broker to do so.

  1. Auto Manufacturers

Auto manufacturers  who sell foreign-made cars in the U.S. are expected to get hit the worst. This is largely in part due to the Trump’s talks of either renegotiating or getting out of the North American Free Trade Agreement with Mexico and Canada.

And if you don’t think it could hurt the industry that bad, just take a look at the global automotive industry ETF, First Trust NASDAQ Global Auto Index Fund (NASDAQ: CARZ) and the one-day drop after the election results came in:

PPT-3
Source: www.etfdb.com

Like the bond market, you could consider put options on this ETF. But I repeat, shorting may not be the best idea because of both the costs and risks involved…

Good trading,

Tom Gentile

4 Responses to “These Three Industries Won’t Thank Trump – But Your Wallet Will”

  1. I keep hearing that China’s currency will become the world standard (to some degree) and that gold prices are going to go to $5,000, $10,000, or maybe even $15,000 per ounce. Do you think this will really happen and if so, when.

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