The only certainty with investing in the Trump era at this time is uncertainty, and uncertainty can bring sharper swings in the market. Dealing with these swings requires patience. We’ve already seen President Trump’s tweets temporarily move markets. When the president tweeted about costs for Air Force One and the F-35 fighter jet, both Boeing (maker of Air Force One) and Lockheed Martin (producer of the F-35) sold off sharply. Currently both stocks are trading above where they did when the tweet first went out, a win for the patient investor. We remain cautious when considering selling on the immediate market reactions to President Trump’s statements.
As the administration moves from campaign mode to governing mode and promises are turned into policy, we should expect surprises in both content and timing of announcements. A strategy we are using to mitigate the effects of the policy changes is to own stocks and funds that are not in the top ten list of Trump campaign promises. We have no edge in trying to guess what the next tweet will be or what company may be called out for their manufacturing strategy. We seek avoidance at this time.
Trade has been a hot issue for this administration and in our opinion will continue to be. Investing in consumer goods companies that are not as export driven like Altria (MO) or CVS (CVS) make more sense to us right now than the trade related names such as PepsiCo (PEP) or Coca-Cola (KO) where over 50% of their revenue comes from overseas. The US has withdrawn from the Trans Pacific Partnership, decided to renegotiate NAFTA, and discussed border adjustment taxes or tariffs. We think the safer course is to steer clear of owning too many companies that are exposed to trade issues.
Investing in the healthcare sector is a calculated risk. With the steps taken already to repeal the Affordable Care Act (ACA) or ‘Obamacare’ as it is more commonly referred to as, there is opportunity. Healthcare insurers could make more money if they are not restricted by the ACA. Drug companies may be able to charge more with less regulation, a promise of the Trump administration. Investing in these stocks does present considered risks however, as the repeal and replacement of the ACA will most likely be highly debated.