We just swore in our first pure business president, the Deal-Maker-in-Chief, Donald Trump, and it's a brave new world for investors.
Or is it? The market pretty much yawned after the inauguration because we have heard it all before.
We've been living with his presidency-in-waiting for almost three months and I can't think of a previous elected official who has given you more of a game plan from his campaign and is now following it out to the letter than Donald J. Trump. He's been giving us a dry run for ages now, which is why I have been so flummoxed by the endless pundits who are saying look out, here comes a real swoon.
I think swoons come from left field. I think huge selloffs come from viciously overbought markets that are jarred by the unknown, like if Trump ordered all the Democrats off the stands or said he needed to challenge the checks-and-balances system of the U.S. to make America great. We didn't get that. We got the same thing from when he stumped the country. From when he received the nomination. From every interview he's given and most of his non-cultural tweets.
Do you think we really don't know Trump's precepts? Were you shocked by his two simple rules: buy American and hire American? Were you caught unaware by his call to "build new roads and highways and bridges and airports and tunnels and railways"? Were you surprised that he talked about other countries stealing our companies and destroying our jobs?
That's been pretty much the rap since he decided to run. That he is sticking to it is totally consistent. How consistent? I almost felt like if you were going to have an avalanche of selling, it would be because the Trump stocks had been bid up so much that profit-taking would roll in. Everything that can be exploited has been exploited and you can't exploit it all over again.
Nor can you sell it, though, ringing the register here, because if he is true to his word, you will miss out on the gains that come from the reality, not from the hype and hope.
Before I tell you how investors reacted and what could happen next, let me explain how difficult it is to buy stocks in the very narrow confines that Trump gives you if you take him literally.
Let's start with buy American and hire American.
For the last 23 years, ever since NAFTA passed, our businesses have been trying to buy non-American and fire American almost as a ritual. Unless there's some sort of transportation advantage, meaning it is impractical or too expensive to make it overseas, there's a very limited universe of manufacturing companies to invest in based on these principles. Companies move jobs offshore to boost earnings. Those jobs are most likely not coming back. The companies that ignored this new global world? They tended to be gobbled up by those who got it and then immediately closed the factories here and put them where Trump doesn't want them.
So the stocks traders bought today fit that very narrow window: concrete, wood, plastics, agriculture, defense. I am not against them. U.S. Concrete (USCR) , Martin Marietta Materials (MLM) , Vulcan Materials (VMC) , defense companies General Dynamics (GD) , Raytheon (RTN) and L3 (LLL) as well as Deere (DE) and anything connected with domestic energy and pipelines? They all work.
So do the pure American service companies, although they aren't all that visible to be had. And of course anything housing because that's purely domestic. However, the variables here away from the president make the exercise daunting. If business accelerates because of Trump, then rates go up, and if rates go up, housing and materials do poorly. If we think we can own companies that sell locally, we are going to run into an Amazon (AMZN) factor. We buy shares in companies that are being disintermediated by the new digital economy, we end up buying losers that the president might like. (Amazon is part of TheStreet's Growth Seeker portfolio.)
Hey, don't believe me? If you asked me what industry the previous president favored the most, it would be solar. What stock was down the most of any S&P 500 name under Obama? First Solar (FSLR) , down 76%. Outmoded by technology. Oh, and while we are at it, what stock was the best performer under Obama? Ulta Salon (ULTA) , because Obama's administration coincided with the era of the selfie and the need to be made up the moment you walk outside.
So let's not go too narrow on this agenda thing.
In fact, I want to step back and view the inauguration as part of the broader continuum we have been talking about. You can't just be trying to invest in what can be bought here and made here by Americans.
It may not have been all that clear, but Trump's starting fresh. He wants new jobs created here, He wants us to buy American when we can. He wants to change laws and fight countries that manipulate currencies so companies can do the right thing and not hurt shareholders. He is, alas, a businessman and he isn't saying to United Technologies (UTX) or Lockheed Martin (LMT) , "I want your earnings sacrificed." He's just saying he wants better deals going forward. He is a negotiator. He wants to make our trade deals better so our companies do better, or, if it doesn't wreck the whole exercise, win at least occasionally. We haven't before him, if you measure deals by whether we export more than we import to a specific country. We're losers on every deal using that key metric.
So what's the way to make that happen? What's the real way to invest in stocks when the President says it's all about America first? The tripod. Yep, the subtext of the speech is about the tripod: lower corporate taxes, repatriate overseas funds and deregulate. The tripod would allow companies to create new jobs in America and hire Americans, which is why we have to focus on the winners in those scenarios.
That's why I keep coming back to the banks and the oils, the domestic companies not being hurt by competition or the need to buy overseas, as well as the companies with gigantic cash hoards overseas, which tend to be tech-oriented business like Apple (AAPL) , Alphabet (GOOGL) and Cisco (CSCO) , which have a huge percentage of cash that can come back here. That's the better, smarter way to invest in the Trump regime. Those are the stocks I have emphasized ever since he was elected. (Apple, Alphabet and Cisco are part of TheStreet's Action Alerts PLUS portfolio.)
Now, there are two issues that matter here going forward: one, how quickly can he jam the tripod through, and two, how is the economy doing in the interim so if he can't get his agenda passed our companies can still beat the earnings estimates and the stocks go higher from here.
Sure, for the moment I think stocks are probably more likely to receive a honeymoon, not a comeuppance. Take IBM (IBM) . It reported a quarter last night that many analysts panned. But I felt that it's on plan to become a more aggressive cloud-based company. After initially falling almost three points, it reversed and vaulted up three. I think that's the glass-half-full people grabbing the vessel from the half-empties. That's Trump optimism seeping into the analysis.
That will diminish soon. But the clock is ticking on the tripod now that Trump's president. I am betting the tripod stands because the Republicans control the House, the Senate and the White House. If I am right, you want to buy any non-earnings-related selloff, not sell it, and be glad you didn't panic out today because it turns out there was nothing to panic over and nobody ever made a dime panicking anyway.