The upcoming United States presidential election will take place on Tuesday, November 8, 2016.
Donald Trump is the nominee for the Republican Party and while it’s assured that his policies are vastly different than his Democratic rival Hillary Clinton, they have been difficult to pin down. This is causing headaches for market handicappers.
But it is safe to say, many of the classic Republican standbys will be big winners under a Trump presidency. And we have some insight into his policies via his stump speeches and tweets. While the picture isn’t crystal clear, we can glean an idea of which dividend stocks will do well under Trump, and which ones will suffer.
With evidence suggesting that who is elected as President can affect returns of certain sectors and industries, here’s how to play things if Trump is elected.
Three stocks that should perform well under a Trump Presidency:
|Ticker||Stock name||Sector||Industry||Trump’s Stance|
|(RTN )||Raytheon||Industrial Goods||Aerospace - Defense Major Diversified||Ending radical Islam, securing the borders and reducing violence in cities have been major talking points of his campaign.|
|(XOM )||Exxon Mobil||Basic Materials||Major Integrated Oil and Gas||Promising to boost the domestic energy sector through lower regulations and fewer environmental requirements.|
|(TRP )||TransCanada||Utilities||Gas Utilities||Strong proponent of the Keystone XL pipeline.|
Three stocks that should perform poorly under a Trump Presidency:
|Ticker||Stock name||Sector||Industry||Trump’s Stance|
|(UNH )||United Health Group||Healthcare||Healthcare Plans||Desires to dismantle Obamacare, leading to individuals having their own healthcare insurance.|
|(JPM ) and (C )||JPMorgan Chase, Citigroup||Financial||Money Center Banks||In favor of reinstating the Glass-Steagall Act.|
|(AAPL ) and (WMT )||Apple, Wal-Mart Stores||Technology, Services||Personal Computers, Discount, Variety Stores||In favor of American-made goods and will likely place tariffs on foreign-made goods. May potentially rewrite various trade policies.|
Buy the Military Complex
Trump emphasizes border security and ending global violence.
Ending radical Islam and stopping ISIS have become major talking points for Trump. “Bomb the hell out them!” is an actual rallying cry for his campaign. Additionally, securing our borders and ending violence in our cities have also become major sticking points for Trump. All of these promises equate to wonderful news – and billion dollar contracts! – for the various defense contractors and military hardware suppliers. Even more so, if Trump steps up his discourse with China over its currency manipulation and moves in the South Sea.
All of that could be wonderful news for Raytheon (RTN ).
RTH is one of the largest defense contractors in the country and has its hands in a variety of military applications. But it has some very Trump-positive attributes, including amajor focus on cybersecurity (to counteract Chinese hacking) and missile defense systems. These sort of precision-targeting missile systems are exactly what ISIS will be seeing if Trump is elected. Investors will see more contracts coming RTN’s way, as well as boosts to its 2.14% dividend.
Energy Will Win
Trump supports lower regulation for fracking and drilling, and is a proponent of Keystone XL.
Trump has promised to boost the domestic energy sector by reducing regulations tied to fracking and drilling. This includes fewer environmental requirements, as well as opening public/Federal lands for more natural resources exploration. Part of Trump’s plan in eliminating ISIS would also include taking back their oil to hand over to American companies.
In that regard, oil giant Exxon Mobil (XOM ) would be the primary winner. Aside from being named by Trump as the beneficiary to ISIS’s oil, XOM is one of the country’s largest frackers, in terms of natural gas production. Any additional lessening in regulation or costs would only benefit its bottom line. XOM yields 3.23%.
Also benefiting on the oil & gas front would be pipeline giant TransCanada (TRP ). TRP’s much maligned Keystone XL pipeline has been delayed indefinitely. Republicans have blamed President Obama and environmentalists for the delay, while Trump has vowed to build the pipeline. TRP may have already moved on from the KXL, but it would get a boost if it tries to build another big midstream system in the U.S. TRP yields 4.90%.
Obamacare Will Lose
Trump opposes Obamacare.
It’s no secret that the Republican Party hates the Affordable Care Act, aka Obamacare. With that in mind, Trump has pledged to dismantle the act and the provisions that “force” U.S. citizens to have health insurance. That’s a problem for the major health insurers like United Health Group Inc. (UNH ). With the roll-out of Obamacare, the insurers have been riding very high. UNH is up a staggering 336% since the passage of the law. Without a steady diet of new policy holders, UNH could see its gains and its 2% dividend suffer, which could happen under a Trump presidency.
Bad for Big Banks
Trump is in favor of reinstating the Glass-Steagall Act.
One area on which both Hillary and Trump agree is that the “Big Banks” hurt Main Street during the Great Recession. One of the big shocks coming out of the Convention was that Trump was in favor of reinstating the Glass-Steagall Act – the Depression-era bill that kept commercial banks from going into capital markets businesses. Traditional savings & loan banking was separate from trading and investment banking at the time. The repeal of the law led to the formation of today’s monster financial institutions.
Bad for Importers
Trump is a big supporter of American-made goods.
Another major talking point for Trump has been the kind of trade deals the United States has recently been making. Trump argues that these deals have pushed manufacturing jobs overseas to places like Mexico and China. Trump’s stance is that he wants to see more goods made here, despite any consequences in terms of price. This includes placing tariffs on foreign-made goods and rewriting various trade policies.
For a dividend stock like Apple (AAPL ) – who builds it products in China – or someone like Wal-Mart (WMT ) – who relies on cheaply made goods for its juicy profit margins – any trade war isn’t the right answer for their bottom lines. These sort of stocks could be major sells if Trump is elected.
The Bottom Line
While Trump’s policies are hard to decipher, there are some winners and losers that can be inferred based on his speeches and public appearances. For dividend investors, a Trump win could make or break their portfolios depending on which stocks they own. The previous examples are just some of the potential winners and losers from a possible Trump Presidency.
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