- Benzinga Advisor
- Posts
- Why Trump-Era Investment Planning Will Be Different Than Expected
Why Trump-Era Investment Planning Will Be Different Than Expected
Despite big talk about oil and gas, energy underperformed during Trump's first term
You're receiving this email because you're subscribed to Advisor from Benzinga. To manage your subscription, click the link at the bottom of this email.
Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.
Today we’re discussing how to help clients financially plan for Trump’s second term - and the importance of focusing on economic fundamentals over campaign headlines.
So, let’s get into the Industry Chatter!
But first, did someone forward you this email? Click here to subscribe!
Lastly, if you would like to be featured in our upcoming Advisor Spotlight and showcase your business in front of all our subscribers, click here to send us an email.
INDUSTRY CHATTER
As your clients inevitably ask about portfolio positioning for Trump's second term, new insights from the Charles Schwab Impact 2024 conference offer crucial talking points for managing expectations and avoiding common investment pitfalls, InvestmentNews reports.
Campaign Narratives Don’t Translate Into Stock Moves
"Be really careful about extrapolation around election narratives," warns Liz Ann Sonders, Schwab's chief investment strategist, providing advisors with a powerful historical example: While many professionals confidently steered clients toward energy stocks during Trump's first term, expecting sector-wide gains, energy actually plummeted over 40%, significantly underperforming all other sectors.
For advisors fielding questions about small-cap allocations—particularly given recent market enthusiasm—Sonders recommends a more nuanced client discussion. Rather than broad small-cap exposure, consider explaining to clients the stark reality that approximately 40% of Russell 2000 companies are unprofitable. Instead, suggest more selective approaches, such as funds tracking the S&P SmallCap 600 Index, which applies stricter quality criteria.
Tariffs May Or May Not Happen - But Prepare Anyway
When discussing Trump's proposed policies with clients, Schwab's chief global investment strategist Jeff Kleintop suggests framing the proposed 26% tariff rate as a negotiating position rather than a certainty. However, advisors should prepare clients for potential inflationary impacts if significant tariffs are implemented.
Fixed income discussions require particular attention, according to Kathy Jones, Schwab's chief fixed income strategist. Consider warning clients that proposed immigration policies could reduce the labor force by 8% or more, potentially driving up labor costs and inflation. This may lead to higher-than-expected terminal rates—possibly 3.5% to 4% rather than the previously anticipated 2.75%.
Focus On Fundamentals, Not Headlines
Bottom line for advisors: Help clients avoid making investment decisions based on political headlines. Instead, focus client conversations on fundamental economic factors, detailed market analysis, and their long-term financial plans. Remember that during Trump's first term, it was broader economic conditions, not policy predictions, that ultimately drove market performance.
Consider scheduling portfolio reviews with clients now to address these concerns proactively and adjust strategies as needed.
MARKET RECAP
Despite widespread anticipation that NVIDIA Corp. (NVDA)'s quarterly results would dictate Wall Street's year-end trajectory, the stock market delivered a robust weekly rebound — even in the absence of its AI darling.
While the semiconductor titan beat analyst expectations on both earnings and revenue for the third quarter, Nvidia's stock remained flat for the week.
Alphabet Inc. (GOOGL/GOOG), the parent company of Google, faced sharp turbulence. Shares tumbled after the U.S. Department of Justice called for the divestiture of Chrome in a bid to curb Google's dominance in search and digital advertising.
The sell-off wiped out over $120 billion in market capitalization on Thursday alone.
A recent Benzinga poll indicates 64% of respondents oppose breaking up Alphabet, with YouTube viewed as the company's most valuable asset.
On the economic front, U.S. private sector activity expanded significantly in November, as reflected in S&P Global's Purchasing Managers' Index surveys. The services sector, in particular, surged at its fastest pace since March 2022, while price pressures continued to recede, creating less headwinds for the Federal Reserve.
Bitcoin’s (BTC/USD) rally shows no signs of cooling, with the cryptocurrency notching its fourth consecutive week of gains and hovering around the historic $100,000 threshold.
The U.S. dollar also maintained its upward momentum, rising for the eighth straight week to reach two-year highs. This latest rally, however, stemmed largely from external turmoil, as escalating geopolitical tensions between Russia and Ukraine, coupled with worsening economic momentum in Europe, triggered sharp weekly sell-offs in the euro and the British pound.
You might have missed…
Trump Backs Drilling
President-elect Donald Trump advocates for increased fossil fuel production with his “drill, baby, drill” policy. In contrast, Elon Musk, co-leader of the proposed Department of Government Efficiency (DOGE), envisions a future dominated by solar energy. UBS analysts recommend investors consider renewable energy stocks following their election-induced market dip.
Trump Crypto Clarity
Cathie Wood of Ark Invest anticipates the Trump administration will provide regulatory clarity for Bitcoin and other digital assets, potentially incorporating them into the Treasury’s strategic reserve.
GM Eyes F1
General Motors (GM) is reportedly preparing to enter Formula One in 2026, potentially partnering with Andretti Autosport. This move would mark GM’s first foray into F1, aligning with its global motorsport expansion strategy., reflecting broader challenges in the EV market.
THE WEEK AHEAD
Economic Data
Monday: Treasury bill auctions
Tuesday: Fed rate committee meeting minutes, US new home sales and building permits
Wednesday: US quarterly GDP, personal income, and personal spending
Thursday: Thanksgiving; Japanese and German inflation
Friday: Black Friday; Chinese Purchasing Managers' Index
Earnings
Click here for the full calendar of economic data and earnings reports.
LEARN WITH BENZINGA PRO
