How To Profit In The Stock Market Under A Trump Administration

In between today and January 20th when Donald Trump officially takes office, we'll be hearing about his picks for top positions such as Secretary of State, Treasury Secretary, and Attorney General.

Among the other 1,200 or so top positions, several could heavily influence policy in the areas of commerce, defense, energy, health, and education.

If Trump's campaign rhetoric comes to fruition, we can expect to see policy changes to ripple across various sectors, if not the entire stock market.

For example, if taxes are cut, then consumer spending would be expected to rise. Similarly, if the Affordable Care Act is dismantled in favor of Speaker Paul Ryan's Better Way plan or Senator's Hatch, Burr, & Upton's Patient CARE Act, then less pressure on health care stocks to lower costs (like drug co-pays) would likely drive Health Care stocks higher.

Profits To Be Made

The uncertainty of Trump's policies, such as those regarding trade and immigration, has created a potential opportunity for investors to profit from a new political landscape.

Investors contemplating shifting their portfolio are looking to beef up on sectors like healthcare, energy, financials, and consumer discretionary.

On the other side of coin, those same investors are looking at the possibility of a withdrawal from or renegotiation of trade deals, which could spark retaliation from global economies, and ultimately hurt the very same stocks expected to surge. These bearish investors are already flocking to perceived safe havens such as Treasuries and gold.

Ok, How Do I Take Advantage?

That's what everyone is asking right now, right? Luckily for you, I've prepared a step by step plan for investors to align their portfolios with the market concepts described above. All you have to do is execute this simple 11-step action plan in exactly the right sequence at exactly the right time (begin satire now).

1. Before any new legislation, correctly identify exactly which stocks within specific market sectors are expected to lag under a Trump administration.

2. Sell those stocks.

3. Set aside 15% of sale proceeds to pay capital gains taxes since you've been sitting on them throughout this prolonged bull run.

4. Before any new legislation, correctly identify exactly which stocks within specific market sectors are expected to rally under a Trump administration.

5. Buy those stocks.

6. Wait until Trump fills his cabinet with the exact individuals expected to fulfill his multitude of campaign promises.

7. Hope the policies you're expecting to play out get passed by a divided GOP as well as fierce opposition from Democratic rivals in both the House and Senate.

8. Pray that the companies you bought benefit from new policy (deregulation, lower taxation, etc) and are capable of increasing profits.

9. Count on the hordes of late investors piling into those same stocks, driving up the intrinsic value of your stocks, and ultimately their share prices.

10. Labor over the valuations of your appreciated positions until you've confirmed each stock within each sector has reached its peak.

11. Sell each stock at it's high point, and hopefully pay 0% in capital gains because Trump has been the POTUS for long enough to completely dismantle the tax code in your favor.

I Smell A Point About To Be Made

Mmmmhhhmmmm, and here it is...

Successful stock picking is easy in theory. While I had a lot of fun dreaming up that sequence, it's true that an investor has to get a lot of things correct at all the right times.

Modern finance shouldn't be based on speculation or subjectivity. It should be a function of scientific process, guided by academic theory and decades of empirical evidence.

Trying to outguess the collective wisdom of millions of investors can cost you in lost returns. Besides, you're already too late. Day traders, professional money managers, and amateur investing hacks have already placed their bets on #1-#5.

The best option is to do nothing, because no one knows what the market's future will bring. We should be reminded that there is so much we don't know. We all assumed Clinton would win the election. We all assumed stocks would falter and bonds would rally (the opposite happened).

Let's stop assuming we know what will happen, since that has already proven to be dangerous for investors trying to outmaneuver the competition.