‘Trump rally’ effects varied
Financial sector is big winner, rallying 12.3% since Nov. 8
Financial stocks soar while others sink
The stock market gains fueled by the “Trump Rally” are adding up to a lot more than chump change.
Returns are piling up for financial stocks and other sectors that benefit most directly from Donald Trump’s domestic-focused, growth-friendly agenda. Wall Street is betting on a stronger economy and bigger profits for many U.S. companies if the presi- dent-elect’s economic plans are implemented.
Overall the large-company Standard & Poor’s 500 stock index has gained 2.8% since Election Day.
But the big winner has been the financial sector. Heading into Thursday’s trading session, financials have rallied 12.3%, accounting for more than half (53.2%) of the S&P 500 gains since Trump’s Nov. 8 election win, according to data from Howard Silverblatt, senior market analyst at S&P Dow Jones Indices.
Banks are getting a huge boost from Trump’s plans to loosen regulatory restrictions and the recent rise in interest rates, which boost banks’ earnings potential, Silverblatt says. The mar- ket is pricing in a faster-growing economy and a resulting increase in inflation and budget deficits fueled by Trump’s plans to slash taxes and spend lavishly on infrastructure projects.
Jim Paulsen, chief investment strategist at Wells Capital Management, ticks off a few other reasons why bank stocks are back in vogue and should fare well in 2017: “With interest rates rising and the yield curve steepening, banks will make more money on cash reserves and the wider spreads on loans. Loan growth is up 8% vs. a year ago, the strongest pace of the recovery.”
Top-performing sectors since Trump’s surprise win include energy and industrials ( both up 6.7%), materials (+5.5%), telecom (+4.4%) and consumer discretionary (+3.6%).
Not all sectors have benefited. Utilities have declined 5.4% since Election Day, consumer staples are down 4.4% and real estate is off 2.4%.