Can Trump Make Your Portfolio Great Again?

While Donald Trump’s presidential victory could result in a “massive risk-off trade” in the near term, how things may unfold in the coming weeks and months is highly uncertain, Morgan Stanley’s Adam S. Parker said in a report. He commented that buying the dip in the near term may not be “sensible,” adding, “We are more bearish today than we were yesterday because of increased uncertainty.”

Investment Advice

Analyst Parker made three recommendations:

1. Owning Industrials: The sector has performed well over the past five days and “generally has better momentum” and does not seem “crowded, particularly among the eight stocks that are $70 billion or larger in market cap,” Parker wrote. He highlighted the following stocks:

• 3M Co MMM.
• Boeing Co BA.
• General Electric Company GE.
• Honeywell International Inc. HON.
• Lockheed Martin Corporation LMT.
• Union Pacific Corporation UNP.
• United Parcel Service, Inc. UPS.
• United Technologies Corporation UTX.

2. Buying Healthcare Stocks: Biotechnology stocks represent “a huge opportunity,” since these companies have significantly higher growth than pharma, all-time high cash balances, and would likely be involved in M&A. The analyst named the following:

• Allergan plc Ordinary Shares AGN.
• Amgen, Inc. AMGN.
• Biogen Inc BIIB.
• Bristol-Myers Squibb Co BMY.

He commented, “The new all Republican administration will likely be less negative on drug pricing from the multiple perspective.”

3. Buying Credit Cards: “We recommend being more balanced with our exposure. We do think the probability of a Fed hike in December is substantial, but we don’t necessarily see the catalysts for the long-end of the curve to materially back up, and curve steepening would be required for a much more bullish view on big banks,” Parker wrote. He recommended:

• Capital One Financial Corp. COF.
• Discover Financial Services DFS.
• Synchrony Financial SYF.

Image Credit: By Gage Skidmore from Peoria, AZ, United States of America (Donald Trump signs) [CC BY-SA 2.0], via Wikimedia Commons