Cramer: Trump Doesn't Seem to Care About the Trump Rally

 | Jan 11, 2017 | 2:31 PM EST
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Did someone forget to tell Donald Trump about the Trump rally? Didn't any of these business advisors let him know that Dow 20,000 is in our grasp and that the Nasdaq has been red hot, led by the biotechs?

This market collapsed today after the president-elect held a press conference where he called for more price competition among the drug companies. It was a stark reminder that the Trump rally's based more on a bigger agenda that's less sector-focused, an agenda that features lower corporate taxes, repatriation of assets and less regulation.

But in the interim, there are knotty issues that are reminders that Trump doesn't take any prisoners when he's made up his mind that there are some squirrelly actors on the scene.

Just like he's been able to browbeat a bunch of executives not to move manufacturing offshore --something that does seem to be working, even if it is in an unorthodox way -- Trump doesn't like the endless price increases he's seen from pharma, something that hasn't really gone away. We know it hasn't because Allergan (AGN) CEO Brent Saunders started a campaign to limit price increases, and the result? He's pretty much the only guy who subscribed to the campaign. (Allergan is part of TheStreet's Action Alerts PLUS portfolio.) 

Consequently, investors got complacent. They figured it's been about a month since Trump singled out the drug companies in his Time magazine Person of the Year interview. So, when so many of these companies told a good story at the JPMorgan conference these last couple of days, especially the biotechs, it was a golden opportunity to do some buying of some laggards that actually represent value. That's right, biotech as value -- what a concept.

Then Trump confounded these investors and they remembered why they stayed away from them to begin with and headed for the hills.

Now, the question is, will this be the buying opportunity in the entire group the way that you had to buy United Technologies (UTX) after Trump managed to keep 1,000 out of 2,000 Carrier jobs from going to Mexico? Will it be like Boeing (BA) , with a stock that has roared since Boeing's CEO Dennis Muilenburg saw the light and said he can make some concessions on the cost of a couple of Air Force Ones? Or will it be like Lockheed Martin (LMT) , which quickly responded today that it's going to get the price of those darned F-35s down? Or will it be like the autos, which got a reprieve when Ford (F) CEO Mark Fields committed to more U.S. building, even as General Motors (GM) CEO Mary Barra defied the president-elect but only because the disputed factory just doesn't make a lot of cars sold in the U.S? I didn't get the sense that Barra's about to send any more jobs down there.

My sense? It will not be like them. In fact, I think Trump recognizes that the drug companies are more hated than even the banks, that they have abused the system with their price increases and that Health and Human Services is going to do something about this whipping boy that will involve substantive rollbacks before this episode's over.

So what do you do about this?

First, let's talk about the Trump rally. Let me make a real observation: Trump's not in on it. In the years I have known Trump, he's not a stock guy. He's never really been that interested. Periodically he's asked me for some names during the old days. I always said buy some Verizon (VZ) . Funny thing about Verizon. It never comes back to bite you and it gives you some good income.

Second, he's pro-business but not necessarily pro-stock market. He does figure that if business does well, everyone does better, kind of a bigger pie for all concerned.

So I think we all better start getting it through our heads that the Trump rally is more animal spirits than it is sector rotation. Trump's not trying to bless Merck (MRK) for coming up with a better lung-cancer drug and he isn't about trying to figure out the cost benefits of orphan drug status.

So if you own health care stocks, understand that he's got a real blunderbuss approach; witness that the company that wants to hold the line on increases for old drugs, Allergan, got whacked as hard as every other stock in the cohort.

Second, the retailers just aren't going to be able to rebound here given that Trump's not dissing the notion of a border tax, some tax that makes it harder to import goods rather than have them made here even if we don't currently have the infrastructure to make them here. Textiles and apparel used to be a big business in this country. NAFTA pretty much wiped it out. It's bad enough that you have Amazon (AMZN) going against these companies; you want a border tax that makes their profits even smaller? Underweight these stocks. (Amazon is part of TheStreet's Growth Seeker portfolio.) 

At the same time, do not hesitate to buy the stocks of companies that benefit directly from the easiest leg of the tripod: deregulation. I think there is a great misconception about what a president can and can't do in this country. If the president wants to make taxes lower, he tends to need the help of Congress. Sure, there are regulations he might be able to order, not unlike the regulation that gutted the Pfizer (PFE) -Allergan deal because it took advantage of a tax loophole. (Lockheed Martin, Ford and Pfizer are part of TheStreet's Dividend Stock Advisor portfolio.) 

But the overall tax changes? They are going to need congressional approval, something I expect will happen but not simply, and certainly not as quickly as the market wants.

However, deregulation is uniquely part of what the president can do by picking like-minded people who want to deregulate. I don't see any people in that Cabinet who want strict enforcement of the current rules that make banks less likely to lend. I think that's what matters. Same with oil and gas. When you pick a guy who is suing the EPA and make him run the EPA, don't expect the EPA to be a big stumbling block to coal or pipelines.

There are reasons why the coal-laden rails and the banks keep holding on even on down days.

So my suggestion is that if you are picking individual stocks beyond just the S&P 500 index funds that I always stress are a must, don't be stretching for a mall-based store and don't be looking for a drug stock. But do be searching for an oil, especially if Rex Tillerson gets confirmed as secretary of state because he seems uniquely suited to opening up hitherto closed markets for U.S. companies.

Maybe there will come a day when Trump says, "Hey, we have a great drug industry and let's embrace it." But that doesn't happen until they heel. He might give the department stores a reprieve, but not until we see more American-made clothes.

But oil and gas and banks? I am calling them sweet spots. They are like United Technologies and Boeing. They get hammered on upcoming earnings? That's an opportunity. Plus, the added benefit? You don't have to be glued to Twitter every minute. You may actually be able to get something done!

Columnist Conversations

Nice move in GPS today. The stock is up 2.7% late in the session and is holding above last month's peak($24.93...
I have read her book, 'Dare to Serve' and have seen her interviewed multiple times by Jim Cramer on Mad Money....

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