Everyone's trying to figure out how to profit from Donald Trump's next four years in the White House. And ETFs are providing clues beyond the S&P 500.
Coming out of the election, investors seemed to pick their three most likely winners from Trump 2.0. Those include financials, small caps and Elon Musk's Tesla.
The biggest tailwind, though, is simply putting the uncertainty of the election's results behind the market. The SPDR Portfolio S&P 500 ETF gained roughly 4% in the week following Election Day.
"Using history as a guide, some investors, like some voters, will be disappointed by the election outcome. Others will be emboldened," said Jack Ablin, chief investment officer at Cresset Capital Management. "Either way, one big uncertainty overhanging the market (is) lifted, allowing investors and Americans to focus on the future."
S&P 500 Financials Stand Out
Among the winners in the S&P 500 sectors, financials stand apart. The Financial Select Sector SPDR Fund, soared nearly 7% in the week following the election. Investors think banks and brokerages will gain if rules are eased to allow for more merger and acquisitions, and new types of financial products.
"Since the election, we have seen strong demand for financial sector ETFs," said Todd Rosenbluth, director of research at TMX Vetta Fi. "Potential deregulation in the banking industry could be a catalyst for the stocks inside these ETFs."
Big Wins On Small Stocks
Shares of small companies also perked up almost immediately following the election. The SPDR Portfolio S&P 600 Small Cap ETF jumped nearly 6% in the postelection week.
Many of Trump's policies could, in theory, advantage smaller companies more than the giants. Lower corporate tax rates could help. And a nationalistic push against global trade might help smaller companies, which generally get a larger piece of their business from the U.S.
"If Republicans cut taxes as expected, this could be a boost to smaller companies," Rosenbluth said.
Small-caps went into the election with a big advantage, says Sam Stovall of CFRA. They were cheaper than the S&P 500. "This should maintain small and mid-cap outperformance, since the S&P MidCap 400 and SmallCap 600 Indices remain attractively valued sporting relative P-Es at discounts of 26% and 28%, respectively," he said.
Betting On Tesla And Musk
Tesla stock is one of the biggest winners in the election. Shares of the electric vehicle maker are up more than 30% since the election.
CEO Musk went all-in on supporting Trump — a risky bet that paid off. Trump has advocated stiff tariffs to keep Chinese electric cars out of the U.S. market. "It's clear that Musk will have a massive role in the Trump White House with his increasing reach clearly across many federal agencies," said Dan Ives of Wedbush.
There will be losers, though. Most expect foreign stocks, especially those in China, to lag, Rosenbluth said.
That's what happened the last time Trump was in office, says Nicholas Colas of DataTrek Research. "From Election Day 2016 through the end of 2019, not one major non-US equity market came close to outperforming the S&P 500," he said.
How S&P 500 Sectors And Sizes Did Since Election
| ETF | Symbol | % ch. Since election |
|---|---|---|
| Consumer Discretionary Select Sector SPDR | XLY | 7.5% |
| Financial Select Sector SPDR | XLF | 6.7% |
| SPDR Portfolio S&P 600 Small Cap | SPSM | 5.4% |
| Energy Select Sector SPDR Fund | XLE | 5.1% |
| Industrial Select Sector SPDR Fund | XLI | 4.6% |
| Communication Services Select Sector SPDR Fund | XLC | 4.5% |
| SPDR Portfolio S&P 400 Mid Cap | SPMD | 4.0% |
| Technology Select Sector SPDR Fund | XLK | 3.9% |
| SPDR Portfolio S&P 500 | SPLG | 3.7% |
| Utilities Select Sector SPDR Fund | XLU | 0.0% |
| Consumer Staples Select Sector SPDR Fund | XLP | -0.1% |
| Health Care Select Sector SPDR Fund | XLV | -0.5% |
| Materials Select Sector SPDR Fund | XLB | -1.1% |
| Real Estate Select Sector SPDR Fund | XLRE | -0.9% |
