Trump 2.0. effect

This week, the markets experienced a dramatic bullish turn following Trump's undeniable victory. I chose the "sit on your hands strategy", taking profits from some open positions while waiting for the euphoria to subside.

As the week comes to a close, here’s a summary of the biggest market winners:

1) Banks

The prevailing belief is that there will be less regulation in the banking sector. Additionally, if interest rates do not decrease as expected — or even rise again — banks' profitability is likely to increase, providing good returns for investors.

2) Payment Companies

Companies such as American Express, Mastercard, and VISA, which are widely recognized, benefited from the enthusiasm surrounding Trump’s reelection. An anticipated increase in employment can lead to more jobs and higher salaries, driving consumer spending and increased use of credit cards to support the overspending that "buying-on-a-click" encourages.

3) Energy Companies

Trump supports oil and gas drilling initiatives and aims to make the U.S. the world's largest energy producer.

4) Coal

Trump is likely to revive the struggling coal industry that has historically bolstered the U.S. economy but was overshadowed by discussions of electric vehicles and renewable energy.

5) Steel

American steel companies are expected to benefit from tariffs on imports, alongside a lighter stance on environmental regulations and taxation.

6) Defense Industry

Trump has asserted that investments in military capabilities and production capacity will increase to outmatch China, Russia, and other peer adversaries.

7) Tesla

Tesla is in a category of its own. While Republicans may not be as supportive of electric vehicles (EVs) as Democrats, the Trump administration's expected cuts to subsidies for alternative energy and electric vehicles will only impact smaller competitors and Chinese EVs. Trump's relationship with Elon Musk provides Tesla with an unmatched scale, resulting in a 14% surge in stock prices as soon as the presidential election results became clear.

8) Cryptocurrencies

As it became evident that Trump would secure reelection, Bitcoin achieved a new all-time high, surpassing $75,000. Additionally, stocks associated with cryptocurrencies, such as Robinhood Markets and MicroStrategy, experienced notable gains. Supporters of the cryptocurrency sector are optimistic that a Trump Administration will ease regulations affecting the industry, and a supportive Congress may enact legislation conducive to its expansion.

9) Prisons

As odd as this may seem, stocks associated with the private prison industry, particularly those of GEO Group and CoreCivic, experienced a significant rise this week. Investors anticipate policy changes that will likely increase the demand for private detention and correctional services.

10) Trump Media

Trump Media has acted as a proxy for market expectations regarding the election outcome. Between September 23th and the end of October, Trump Media’s value more than tripled due to speculation that Trump would secure the presidency.

11) Health Insurers

Insurers operating Medicare Advantage programs saw the most significant gains, as these programs are private versions of the government's primary enrollment initiative. Conversely, insurers and healthcare providers like Elevance Health and Centene, which focus on government-supported Medicaid programs for lower-income populations, saw their shares decline.

12) Software

Software stocks have rebounded strongly since early August, with analysts anticipating that the Trump administration could be a catalyst for IT budgets among American companies. Expectations of a favorable economic climate in the U.S. encourages optimism about technology spending. Additionally, software companies stand to benefit from a more accommodating regulatory environment under Trump’s second term.

This macro analysis requires thorough research to identify the companies in each industry with the highest growth potential. Many of the largest players are currently in an "over-valued" position according to the RSI technical analysis tool, so take your time to choose your stocks wisely and refresh your stock portfolio accordingly.