In first 100 days, a
reversal of fortune for Trump favorites on Wall Street
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[April 29, 2017]
By Noel Randewich
SAN FRANCISCO (Reuters) - A funny thing
happened on Wall Street in Donald Trump's first 100 days in the White
House: Shares of companies that got closest to the president lagged the
market's march higher.
Meanwhile, stocks from sectors that have had less access, and have faced
occasional bluster from Trump, such as media and technology, have hopped
into the driver seat.
Banks, industrials and other companies expected to win from Trump's
policies surged following his unexpected election victory in November.
Valuations for many grew stretched.
But Wall Street's change in focus in recent months also reflects
concerns among investors that Trump may struggle to enact deep tax cuts
and stimulate economic growth as quickly as previously expected. Indeed,
the economy grew just 0.7 percent on an annualized basis in the first
quarter, the first of Trump's presidency, as consumer spending stalled.
Many of the industries Trump singled out for special attention, like
coalminers, steelmakers and oil companies, face major market trends and
commodity price fluctuations that he can do little to change.
Since Trump's inauguration on Jan. 20, representatives from nearly 100
publicly-listed companies have visited the White House, with carmakers,
healthcare companies, banks and industrials getting more face time than
technology companies, retailers and media firms.
Shares of companies that have visited the White House since the
inauguration have enjoyed a median increase of 3.7 percent, trailing the
benchmark Standard & Poor's 500 Index's gain of 5.5 percent.
But Trump's recent failure to push a healthcare overhaul through
Congress, as well as other miscues, now have investors a little less
sure he will be able to make good on his promises.
The S&P 500 is near record highs after the administration unveiled a
long-awaited proposal Wednesday to steeply cut corporate tax rates. But
the plan may be unpalatable to Republican fiscal hawks since it lacks
proposals for raising new revenue and would potentially add billions of
dollars to the federal deficit.
"The stability of the market and its ability to rise is still based on
the feeling that the administration may be getting its act together,"
said Tim Ghriskey, chief investment officer of Solaris Group in Bedford
Hills, New York. "But at some point investors will ask if any of this
stuff is going to happen or if it's all talk."
- For graphics on 'S&P performance by sector' click:
- For graphics on 'Presidential markets' click: http://tmsnrt.rs/2ptQvgZ
- For graphics on 'Currency and bonds: hope vs reality' click:
- For graphics on 'Who has Trump's ear ' click: http://tmsnrt.rs/2qbI3DF
EARLY WINNERS FADE
Since the election, the financial sector <.SPSY> has risen 19 percent,
more than any other. But its gain since the inauguration has been among
the weakest, at 3 percent.
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Traders work on the floor of the New York Stock Exchange shortly
before the opening bell in New York, U.S., April 27, 2017.
An investor buying a basket of banks and selling utilities immediately after
Trump's election would have made as much as 29 percent by mid-February. But that
gain has since shrunk to 17 percent, according to Vincent Deluard, Vice
President, Global Macro Strategy at INTL FCStone Financial Inc.
Other "Trump trades" have lost momentum.
Investors bet big on steel right out of the gate after Election Day, with the
industry seen as a poster child for Trump's focus on "unfair" trade deals that
hurt U.S. producers. The S&P 1500 steel industry group index <.SPCOMSTEEL> had
gained 36 percent by the first week of December.
The group is down by more than 13 percent since then, however, and even last
week's executive order to investigate whether U.S. steel companies need
additional trade protections under the auspices of national security delivered
only a short-lived rebound. Poor earnings from sector heavyweight United States
Steel Corp <X.N> ruined the party.
Trump this month signed an executive order sweeping away Obama-era climate
change regulations, saying it would end America's "war on coal." But reflecting
an abundance of cheap natural gas and falling costs of wind and solar power,
coal miners CONSOL Energy <CNX.N> and Cloud Peak Energy <CLD.N> have dropped 16
percent and 32 percent, respectively, in Trump's first 100 days.
Meanwhile, tech stocks that were left out of the early Trump rally have surged
recently as investors shift out of low-valuation stocks favored immediately
after the election and back into high-growth stocks like Alphabet <GOOGL.O> and
Facebook <FB.O> that delivered much of the market's momentum in recent years.
In the absence of concrete results from Trump, corporate earnings have taken
center stage, with first-quarter profits of S&P 500 companies expected to surge
13.6 percent, helped by strong international growth.
"Earnings are through-the-roof good. Companies are very profitable, and
potentially are going to be more profitable with tax-cut legislation," said
Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco.
Other stocks seen as out of favor under Trump have also outperformed during his
first 100 days.
Tesla <TSLA.O>, which some investors feared could be hurt by the removal of tax
incentives for the purchase of its electric vehicles, has surged 27 percent to
And perhaps most telling of all, the media sector - regularly lambasted by Trump
for its coverage of him - is up 7 percent since he took office.
Even New York Times Co <NYT.N>, publisher of what Trump has repeatedly
disparaged as "the failed New York Times" newspaper, hit a three-year high after
the inauguration and is up 10 percent since he moved into the White House.
(Reporting by Noel Randewich; Editing by Dan Burns and Nick Zieminski)
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