The moment Trump won the presidential election, the stock market saw a huge spike in earnings. One of the reasons behind the spike is the fact that heavyweight investors were placing their bets on the upcoming regulation and tax changes that Trump kept repeating during his campaign. The three sectors that saw the biggest gains are the retailers, builders, and banks. However, nearly 100 days of Trump's presidency later, investor confidence is “back to zero.” In fact, some are now loud naysayers.
The financial sector has experienced a double-digit bullish rally after Trump won the election. Trump promised massive corporate tax rate reductions, and that means financial institutions can keep more profits. More profits generally translate to a more valuable stock. Hence, heavyweight investors are betting that when the tax cuts are implemented, the stock value of financial institutions would eventually rise. There is just one flaw.
Trump is known to back-off from his promises. The promised corporate tax rate was 15%, which was previously at around 35%. Now, Trump promises a new rate of around 15% - 20%. However, analysts are saying that it would settle around 28%. That's not really far from the previous 35% rate. Furthermore, add the fact that the implementation of tax reforms is going slow and investors are slowly turning to the opposite direction. In fact, Bank of America is one of the biggest nonbelievers of the new tax reform's impact.
Goldman Sachs monitors a basket of 50 companies. Following the election, the basket gained 14%. Now, it has fallen by 3.6%.
Industrial stocks experienced a 5.6% growth in just a week after Trump's election. Heavyweight investors are betting on the idea that if Trump follows through his promise of rebuilding the country's infrastructure, it would mean more business for the builders, engineering firms, and raw material producers. Trump promised that infrastructure spending would be increased to at least $1 trillion.
Nowadays, investors are slowly experiencing the reality of Trump's infrastructure spending promise. According to some reports, the White House is planning to re-schedule the implementation of the promise. The earliest implementation may happen in 2018. But that’s only if Trump stays true to his word.
As a result, investors are slowly retracting their bets. In fact, Bridgewater expressed strong skepticism about the industrial sector bet. Now, the industrial sector is experiencing more and more pessimism. As a result, the sector is seeing a 3.1% drop.
A lot of investors are also placing their bets on U.S. retailers. The idea is rooted in Trump's promise on the "border tax." Basically, this means that anyone that purchases products that come from outside the country is subjected to this border tax. This encourages consumers to purchase products from U.S. retailers. More profits for U.S. retailers would mean higher stock value.
After the election, the S&P Retailing Index gained more than 6% in a month. While the index experienced a recent dip, it recovered in 2017. It's now climbing at 6.9% YTD. Thankfully, it's not all bad news, but then again, experts are saying that Trump has nothing to do with the recovery.