The immediate market reaction to President-elect Donald Trump's victory has included a rally in stocks, a strengthening dollar, higher Treasury yields and a surge in Bitcoin and other cryptocurrencies.
However, advisers are cautioning clients against making any immediate adjustments to investment allocations until there is more clarity about the administration's top priorities around tariffs, tax policy, regulatory frameworks and who to tap for key cabinet posts. .
LPL Financial is maintaining guidance it released Monday, shortly before the election, outlining the potential implications for each candidate's victory. He noted that stock markets often bounce around a bit in the first weeks and months after an election, as policy implications become more pronounced.
“In terms of how investors should position portfolios, we will sit tight, wait for results and then consider some changes within politically sensitive market segments such as banking, energy, small cap , emerging markets and bonds,” according to the note authored by Jeffery Buchbinder, chief equity strategist, and Adam Turnquist, chief technical strategist.
The memo also noted some potential winners and losers in the wake of Trump's victory. Potential winners included banking and financials, defense, oil and gas, small caps, US steelmakers and inflation-protected Treasuries. Potential losers included China, Mexico, electric vehicles, health care, renewables and long-term Treasuries.
LPL's strategic and tactical allocation committees “recommend that investors remain fully invested in their targets for both equities and fixed income from a tactical asset allocation perspective – with an alternative potentially small, funded position from cash, to help mitigate potential volatility for the right investors.”
The LPL committee also maintained its preference for growth stocks over value.
That sentiment was echoed by Ryan Detrick, chief market strategist at Carson Group.
“In the wake of an election, or any highly emotional moment (positive or negative), it's important for counselors to keep emotions in check, whether clients are very high or very low. The reality is that history does not show much correlation between stock market returns and those in the White House,” Detrick wrote in an email. “Clients' reminder that the economy remains strong, earnings are at record levels, inflation is contained and the Fed is now desperate are all reasons to expect this more than 2-year bull market to have plenty of legs. That's what customers need to hear.”
Carnegie Investment Counsel Director of Research Greg Halter said the firm will not provide clients with a “full statement” about the election and is instead focusing on reacting to market changes as they arise.
“Many times, an action has a completely unexpected reaction – positive OR negative,” Halter wrote in an email. “The US economy is big and it's hard to 'turn a fighting penny,' as the saying goes.”
Halter expects the tax policy enacted in Trump's first term, which was set to expire, will be extended.
“Corporate taxes are likely to come down, which will help the bottom line,” he wrote.
In addition, Halter said sectors such as banking and finance are likely to benefit from less regulation, while an energy policy that encourages oil and gas drilling could boost energy companies.
But in some respects, there are more questions than answers.
“How about tariffs – threat or actual? Will this hurt retail? Will this result in higher prices? Will this result in higher wages?” wrote Halter. “What about the public sector? Will the federal government shrink? If so, what is the impact on those workers who may be out of a job?”
MFAC Financial Advisors CEO Mitchell Freedman said trying to make a Trump Trade or Harris Trade was no different than trying to time the market.
Daniel Wiltshire, an actuary and IFA with Wiltshire Wealth, said sectors such as industrials and financial services could benefit from a Trump victory, although he warned that as markets quickly adjust to new information, “the opportunity to profit from the election result could to have already passed.
Kip Lytel, a wealth management advisor with Montecito Capital Management, urged clients to consider overweight sectors such as traditional energy, defense, real estate investment trusts and financial stocks (including blockchain). He warned that Trump's pro-tariff positions could be “harmful to trade and the end consumer” if he were aggressive across the board.
Additionally, Charles E. Helme, a managing director at BH Asset Management, said clients worried about deficit spending and inflation should worry regardless of the winner, since Harris and Trump ran on platforms “that promise tax cuts or spending that do not have an offset to prevent inflationary fiscal stimulus.”
Patrick Donachie and Elaine Misonzhnik contributed to this story.