The article was written by Jacob Saphir, a Financial Analyst at I Know First.

Stock Prediction Under Trump Presidency

“What separates the winners from the losers is how a person reacts to each new twist of fate.” Donald Trump

Summary:

• Stock market is responding positively to Donald’s Trump 2016 US election victory.
• Financial Industry is benefiting from expected rise in interest rate and proposed deregulation
• Favorable policy for the energy industry
• “America’s Infrastructure First” plan could benefit basic industries
• Revising the Affordable Care Act could result in higher profit for healthcare industry

Background:

In the most improbable political victory, Donald Trump defied the odds and won the 2016 US election on November 9, 2016.  Stunned by misleading polls, all favoring Hilary Clinton, many watched in disbelief.  Immediately after Clinton’s stunning lose, the pre-market activity began with a massive sell-off.  Fearing Trump’s unpredictability will bring instability, many contemplated selling their assets.  However, the market’s fear was turned to optimism by the end of the day.  Seemingly, investors have faith in his presidency and in the economy.  As the major index, S&P 500 has increased by over 2% to date, many ask: which industries stand to benefit from Trump’s victory?

Financial Industry Outlook 

Banks are benefiting from Trump’s victory.  According to the S&P 500 Financial Sector ETF: XLF, the stock’s price has increased by over 11% since Trump’s victory. In addition, Bank of America has increased to over $20 a share.  A level not reached in 8 years.  Another company I Know First’s accurately forecast on November 2, 2016, is OFG Bancorp (OFG). The financials are increasing due to expectation for deregulating rules that hamper bank’s profitability and increasing interest rate under Trump’s term in office.  Higher interest rates will bring higher revenue from lending money.  The more money earned in interest, the higher the revenue earned among the financial firms.  Among his proposal to ease regulations in the financial sector, such as the Dodd-Frank Regulations, Trump is looking to reestablish the Glass-Steagall Act.  The Glass-Steagall Act would separate commercial and investment banking.  Easing regulations from financials could benefit others, such as energy companies.

Fossil Fuel Industry Outlook 

Unlike Hilary, Trump is a big proponent on America not being dependent on foreign oil.  His policy is geared towards revitalizing the energy sector and removing strict EPA guidelines making it difficult for US companies, especially oil and coal to compete.  If one country can drill or mine the commodity with ease, thus cheaper, more companies are inclined to do business and improve competition among other nations.  This is among the reasons why the US coals industry have lost significant business to China and US oil continues to be untapped.  Under Trump’s “America First Energy Plan”, he wants to explore, mine, or drill “$50 trillion dollars in untapped shale, oil and natural gas reserves, plus hundreds of years in clean coal reserves”.  Trump’s comments of global warming as an “expensive hoax”, not only benefits the use of fossil fuel, but would leave renewable energy sector with a less favorable president.  This why we see companies, such as Clayton Williams Energy International (CWEI) soar, and renewable energy companies foreshadowing a less favorable administration.  The Keystone XL pipeline may receive approval after stiff rejection from the Obama administration.  Just as energy companies are benefiting from Trump’s expected policy, so will basic industries.

Basic Industries Industry Outlook 

Trump’s “America’s Infrastructure First” plans to invest $1 trillion to repair and improve America’s neglected infrastructures.  Trump has criticized during his candidacy how previous administrations have refused to address America’s need to maintain its infrastructures.  From providing drinkable water in Flint, Michigan to repairing the bridges and highways deemed dangerously in need of repair.  It’s not only Trump who has criticized America’s falter, but current Vice President Joe Biden referred to LaGuardia airport in New York City which accommodates over 20 million travelers as something belonging to a third world.  He called the airport embarrassing.  Such reconstruction of this airport and other infrastructures could lead basic industries, such as US steel (X) and AK Steel Holding Corporation (AKS), both stocks accurately forecasted by I Know First to higher profit.  Also another industry that sees an increase in Trump’s policy is shipping.  They see Trump’s policy in reviewing trade deals to increase trade and possibly increase commodity prices.  One such stock that I Know First accurately forecasted was Dryships, Inc. (DRYS).  As stock that skyrocketed in value by 833% in 7 days.   As basic industries see potential in Trump’s presidency, so does pharmaceutical.

Pharmaceutical Industry Outlook 

Clinton was more critical during her campaign against pharmaceutical companies.  Had she won, healthcare firms would face a different future.  Her policy may not have been as favorable as Trump’s.  In fact, during her rise in popularity, investors were pessimistic and some companies stock’s were declining.  Differing Clinton’s viewpoint by taking a softer tone.  Trump is proposing to reform the Food and Drug Administration.  Pharmaceutical companies would benefit his proposal to speed up the process of releasing medicine to the public, by easing regulations. According to the Washington Post, companies have complained “the drug-approval process can be onerous, bureaucratic and a barrier to competition.” Currently the industry Companies are seeing a brighter future from his victory.  Companies such as, Keryx Biopharmaceuticals, Inc. (KERX), another company I Know First accurately forecasted, has seen its stock increase by over 38% in a time span of 14 days from November 6, 2016.

I Know First’s Trump Election Forecast Success

Before the U.S. election results, I Know First’s AI-based on algorithm had forecasted bullish firm-specific forecasts for the above mentioned industries. From the steel industry, this Small Cap Stocks forecast showed AKS achieving a return of 37.24% from November 8th, 2016 to November 15th, 2016. To date, AKS share prices are up 55.61%, corresponding to the algorithms successful forecast. Later, on November 16th, 2016, an I Know First analyst had written a positive outlook on United States Steel Corporation (X) in accordance with the I Know First algorithm. Since then, X shares have risen by over 45% to date. Within the fossil fuel Industries, CWEI had received a bullish forecast from I Know First as part of the Risk-Conscious Stocks forecast, before the U.S. election on November 6th, 2016 till November 13th, 2016. In accordance with the bullish forecast, CWEI shares rose 4.91% during the 7 day period, and are up 41.49% to date. Additionally, from the financial industry, I Know First’s algorithm had as well successfully forecasted a 23.70% return for OFG from this 14 days Bank Stocks forecast, beginning before the U.S. elections on November 2nd, 2016.

Conclusion:

Although Trump may not be accepted by some, so far his victory has been a welcome to many in Wall Street.  Since Trump’s victory in the 2016 election, major indexes have reversed its initial selling frenzy towards approaching new highs. Despite people’s initial fear, Trump is going to be the 45th US president. People can either contest the election’s outcome or learn to adapt to its given environment.  In this case, one way to adopt is to invest in industries forecasted to benefit under Trump’s term.  As Donald Trump said, “what separates the winners from the losers is how a person reacts to each new twist of fate.” The industries shown earlier may stand to benefit under his presidency.