Sector Analysis Breakdown

Let's start by discussing some of the financial market sectors that may see some benefits or challenges after Donald Trump's 2024 election win. These are based on his previous policy inclinations and current campaign promises, along with general market expectations:

Energy Sector: Trump's policies have historically favored fossil fuels, potentially benefiting companies in oil and gas exploration, production, and refining. His administration might reduce regulations on fracking, coal mining, and other traditional energy sources. This could lift stocks like ExxonMobil, Chevron, or companies involved in pipeline infrastructure.

Defense and Aerospace: Trump's emphasis on military strength could lead to increased defense spending, which would likely benefit companies like Lockheed Martin, Boeing, Raytheon, and others in the defense industry.

Financial Services: Trump has historically advocated for deregulation in the financial sector. This could mean a favorable environment for banks, investment firms, and financial technology companies, potentially boosting stocks like JPMorgan Chase, Goldman Sachs, and others.

Cryptocurrency and Blockchain: Interestingly, there's a sentiment among some Twitter/X users and analysts that Trump might foster a more crypto-friendly regulatory environment, influenced by his potential views on innovation or personal endorsements. This could see a rise in cryptocurrency-related stocks and companies involved in blockchain technology.

Pharmaceuticals and Biotech: Trump's first term saw significant developments in healthcare, including Operation Warp Speed for vaccine development. If this trend continues, pharmaceutical companies might see benefits, though this sector could also face pressures from drug pricing reforms. Now, with the addition of RFK Jr. in the mix, the healthcare sector could be one to watch—for better or for worse.

Small-Cap Stocks: There's an anticipation that small-cap stocks could benefit from a Trump victory due to policies favoring small businesses, including tax cuts and deregulation. The initial market reaction seems to support this.

Construction and Materials: Although not explicitly tied to Trump's current campaign promises, increased infrastructure spending was a significant part of his previous term's rhetoric. Companies like Caterpillar for construction equipment and Vulcan Materials for construction materials could see benefits.

On a broader or “macro” scale, here's how a Trump win may influence the longer timeframe trends within interest rates, metals, energy and equities:

Interest Rates and Rate Sensitive Investments (Treasuries, Traded REIT’s, Etc.)

Since the start of 2024, our viewpoint on interest rates has been that the market is trying to create a Goldilocks range where the 10-Year Treasury trades between around 3.5% to 4.5% (give or take).

We'd expect the 10yr to reach the high end when there's news that is interpreted as growth friendly or inflationary (like we are today), then declining towards the lower level when news is interpreted as more recessionary in spirit.

Now, this thesis should get the ultimate test.

With a Trump win, and a potential red sweep in Congress, all investors should be watching the yield on the 10yr Treasury more closely than they're watching the stock market. If—and this is a big IF—the 10yr is able to stay in a range below 4.75% and above 3.5% between now and spring of 2025, that would add a lot of evidence to the Goldilocks rate scenario and allow investors to continue to hold and possibly increase their exposure to rate sensitive investments like Traded Real Estate, Utilities and Treasury Funds.

However, if rates push significantly above 5%, the wheels may start to wobble. For these reasons, we're watching the reaction in interest rates over the next few weeks with a keen and opportunistic eye.

Metals

Gold, Silver and the Miners have had a great 2024! Many people were buying them prior to the election as a hedge against uncertainty (in the event there wasn’t a clear winner of the election).

As a result, we should expect the initial reaction in these markets to be a selloff, as many investors remove those bets and others take profits. If you've been wanting to invest in metals, this may give you an entry point, as the results of the election may cause a correction in these markets.

We view this correction as something happening in the midst of a larger, longer-term rising trend. So, for now, we're viewing any post-election sell off in metals as a possible buying opportunity for longer-term, patient investors of metals. But keep in mind that this is always subject to change.

Energy and Oil

Post-election, the initial reaction is a subtle decline in Oil and a healthy pop higher for Energy Stocks.

In our view, a Trump win doesn’t change much of our previous bullish long-term thesis on Oil and Energy. However, a Trump win could mean reduced regulation for the Oil Service sector, helping to boost what has otherwise been a poor performance in 2024.

For now, our view continues: as long as the price of a barrel of Oil remains above $70 and conflicts in the middle east remain the same, we're holders of our current oil and energy holdings.

Equities

When it comes to equity markets, it's important to remember that they rallied higher into the election. And from a technical analysis view, many equity markets are stretched and may be closer to a high than a low.

However, this doesn’t mean they can’t stretch further. After the first Trump win in 2016, equities broke out higher and kept running for the entire year of 2017 with very few pull backs.

This is where strategic diversification becomes important to investors that want to take advantage of opportunities in a prudent, risk-management way. Strategic diversification is where we search for individual names and select market sectors to diversify our capital rather than investing in broader indexes, like the SP500 or Dow.

What is Quiver Doing?

Here's how we went into this election:

• A fairly healthy exposure in metals, energy and cash alternatives: 15-30% each.
• A very light exposure to interest rate sensitive investments like treasuries and traded REITs: 5% or less.
• A fair and hedged exposure to equities in the form of Defense/Aerospace, Google, Microsoft, Amazon, ASML, Regional Banks, and Small Caps.

Now that we're on the other side of the election, some of our holdings (like metals) have had a sell off that may be worth taking advantage of. Other holdings (like regional banks and small caps) are looking like they're going to break out higher. So, we'll look for opportunities to add to each of our existing holdings with the cash we have on hand.

The Bottom Line

In closing, it's important to keep in mind that there are complexities and potential drawbacks to watch for, including:

Trade Policies: If not handled well, Trump's emphasis on reducing the trade deficit through tariffs could affect various sectors negatively, potentially leading to increased costs for consumers and companies.

Economic Policies: Promises like ending inflation and tax cuts might boost consumer spending and corporate profits in the short term. If confidence rises, this could potentially benefit retail, consumer discretionary sectors, and broader market indices.

The sentiment from various sources, including Trump's own posts, suggests a belief in significant economic turnaround with his policies, focusing on deregulation, tax cuts, and protectionism.

However, the actual impact on specific sectors would also depend on policy implementation, global economic conditions, and other legislative actions. Always consider that market reactions can be unpredictable, and while certain sectors might be favored by policy direction, broader economic forces, investor sentiment, and global events play crucial roles in determining sector performance.

For these reasons, we'll be updating you in future editions of Market Minutes From The Boardroom.

Until next time, take care.

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