Trump's Win Yields Important Wisdom

Good Morning,

U.S. equities closed mostly higher on Friday, with the three major indexes posting their best weekly gains of the year on the back of a surprise Republican sweep.
Stocks skyrocketed after Republican Donald Trump's surprise victory over Hillary Clinton, as investors considered the prospects of higher infrastructure spending and less regulation within the financial sector.
Since Trump's victory, investors have been quickly reallocating assets, increasing exposure to financials and industrials, while lowering positions in sectors like utilities, real estate and consumer staples.
As of Friday's close, financials and industrials had gained 11.33 percent and 7.96 percent, respectively, while utilities, consumer staples and real estate were down 4.08 percent, 2.13 percent and 1.47 percent, respectively.
What is winning and losing? (Too soon to say whether these trends will continue)



  • BANKS: rallied as Trump has vowed to reduce regulation
  • DRUGMAKERS: surged as Democratic threats of price controls are no longer a concern with Republicans retaining both houses of Congress
  • DEFENSE & INFRASTRUCTURE: Lockheed Martin Corp. and Caterpillar Inc. climbed on Trump’s pledge to boost spending in both industries
  • PRISON OPERATORS: Corrections Corp. soared on speculation the new administration will rescind a government contract phase-out


  • INTERNATIONAL TRADE: Coca-Cola Co. and Procter & Gamble Co. retreated
  • GUNMAKERS: Sturm Ruger & Co. sank on speculation that fewer people would rush out to stock up on pistols and rifles with the threat of stronger gun control laws fading
  • HOSPITAL OPERATORS: Community Health Systems Inc. sank on speculation Trump will move to repeal Obamacare
  • CLEAN ENERGY: SunPower Corp. fell on concern Trump will weaken demand for renewable energy

In addition, the dollar surged on the week as sharp moves were also seen in the U.S. Treasury market with the benchmark 10-year yield breaking above 2 percent.
Could we be seeing market participants considering a Trump presidency as a transition from a government that had its hands around the neck of growth to a free economy?


Our Take
Quite frankly these moves were incredible yet understandable given that the “conventional wisdom” going into election got it wrong yet again (like they did for Brexit). As I wrote after Brexit investors would do well to distinguish between the trend of the system and the trends in the system.
Political preferences aside, what happened on Tuesday was not a collapse of democracy but simply a powerful blow to the misplaced arrogance of the U.S. elite.
Trump won not because he was perceived to be a racist, xenophobic and even sexist candidate (in fact Trump won several states that voted twice for America’s first black president). He won despite these deplorable characteristics because he was not just a nationalist populist but an anti-corruption crusader that was masterful at turning anger – over lost jobs, lost wages, lost hope – into votes. Americans simply had become fed up with a ruling elite that appeared to have become increasingly corrupt and out of touch with a growing majority of Americans that have been left behind by a wave of prosperity that has lifted only a few large boats.
Six out of ten Americans didn’t even like Donald Trump. But the number that mattered in the election was this one: Two-thirds of voters said the U.S. was on the wrong track.
Thus, he was the outsider they wanted. And he knew it. He was a master marketer that understood the political marketplace better than any pundit, pollster or status quo politician. He successfully painted Clinton as the embodiment of the Washington establishment Americans had grown tired of, and she never crafted a capable comeback.
Now we can argue (as many have) that the Clintons are not in fact corrupt, but that isn’t the point. The optics were sufficiently convincing. Furthermore, Democrats once represented the working class. Not any more. Bill Clinton and Barack Obama in fact shifted power away from the people towards corporations. It was this that created an opening for Trump.
Luckily, business as usual looks to have been disrupted and the Trump administration has been presented with a unique opportunity to start with a set of bipartisan issues that could begin the healing process for the country and pave the way for continued innovation.

Thought of the Week


" The stock market will be higher 10, 20, 30 years from now, and it would have been wih Hillary, and it ... will be with Trump," –Warren Buffet

Stories and Ideas of Interest


  • Trump’s win yields investing wisdom. I’m getting tired of hearing the endless bickering on social media regarding what happened during the election. The continued negative and elitist judgments from the left about Trump’s supporters etc. The result was a major surprise for many but the reaction should be to decipher what lessons can be learned, rather than to confirm one’s prior beliefs. Barry Ritholtz puts together an excellent list of lessons.
  1. Forecasters are terrible: they almost always get it wrong
  2. Confirmation bias: everyone reads what confirms their prior beliefs (this is even worse in our echo chamber social media world.
  3. Models are not perfect
  4. Optimism bias: we each think we are above average. Most of us are not.
  5. Random factors and luck: we underestimate the impact of luck and confuse random chance with skill.
  6. Hindsight bias: many of us believe we knew it all along.
  7. The Narrative: we create a story line after the fact to try and make sense of what we can’t explain.
  8. Nobody knows anything: my personal favorite. Be humble.


  • Startups and Tech under Trump. From carried interest to cybersecurity to tech talent concerns, VCs for CB Insights analyze the impact of Trump's victory on startups and tech. Interesting trends here including bio-tech, cybersecurity and infrastructure boosts  


  • 2016 was an awful election. 2020 will likely be worse. Interesting piece from Quartz looking at the trends that will shape the 2020 election. One in particular I like:  “Red” and “blue” America will fragment further into self-contained worlds of fan fiction.


  • Things won’t get any easier for the low skilled worker. Trump / Clinton it doesn’t matter. Robots could displace millions of jobs with industries favoring a digital revolution at the expense of human workers, according to a UN report.


  • What’s behind a sudden foreclosure spike? Foreclosures had been falling steadily to the lowest levels in nine years, but a curious spike in October may be the first sign of a crack in the recovery.


All the best for a productive week,

Logos LP