Weekly Update: Market Soars on Trump Victory
Good evening, and welcome to this week’s edition of Stealth Trades!
The Trump economy is off to a great start.
Tuesday’s night election victory sent stocks soaring, delivering the biggest single-day gain in years.
The S&P 500 index made a new all-time high on Wednesday… another one on Thursday… and yet another on Friday.
So did the Dow Jones and Nasdaq indexes.
As we forecast over the last several weeks, investors are extremely optimistic about the next four years. And the equity market is already pricing in the expectations of Trump’s proposals.
On Wednesday, the Net Highs/Lows indicator hit an incredible 758 – meaning 758 more stocks made new all-time highs for the day versus new lows.
This is the highest reading since December 2016.
In terms of sector strength, the big winners so far are crypto, timber, airlines, infrastructure, and consumer discretionary. These are the areas of the market that have seen the largest gains over the last few weeks.
Crypto is benefitting from President-elect Trump’s pro-crypto stance and remarks that he wants the US to be the leader in digital currencies. Infrastructure is also rising on assumptions that he will allocate tax dollars to improve aging infrastructure.
Airlines, timber and consumer discretionary sectors are all cyclical sectors. These areas tend to move in lockstep with the overall economy. When conditions are good, these areas perform well and vice versa.
So, this is yet another sign that investors believe economic conditions will improve under Trump’s leadership.
Small-cap stocks, which have underperformed over the last few years, saw the biggest gains this week.
The Russell 2000 small cap index gapped up 5.7% following the election results.
If you attended my live webinar on Tuesday, you heard me lay out my case for why this would happen. I also highlighted the breakout pattern forming on the Russell pictured above.
Smaller companies tend to do most of their business domestically. And Trump’s protectionist policies including tariffs and renegotiating trade deals will favor these companies more than global operators.
I remain bullish on the market with a particular focus on nuclear stocks.
Republicans now control the White House, Senate and the House of Representatives. When one party has a majority in all three houses, more tends to get done since the other side is unable to block their moves with a voting majority.
I will not call this a good thing or a bad thing, only that the new administration will be able to push their agenda through more easily.
From what I can tell, Trump is open to a nuclear future. As a renewable energy source, it is one of a small handful of issues that both sides of the aisle could get behind. Elon Musk – who will likely serve as a key advisor to Trump – knows the importance of increasing our power output, especially for artificial intelligence data centers.
Nano Nuclear Energy (NNE), Oklo (OKLO), and my personal favorite NuScale Power (SMR) all continue to surge higher. SMR is up over 20% this week alone.
The nuclear trade is still on, and investors would be wise to ride that momentum until it slows. As long as these stocks hold above their 21-day moving average, I would continue to hold.
Insider buying has also picked up this week, and I expect to see much more activity in the coming days and weeks. We will continue to scan the database for new Form 4 filings and alert Insider Effect members to the biggest opportunities we see.
Folks, the bull market is in full force. This is not a time to be on the sidelines. Stay long and enjoy the ride.
Best wishes for your trading,
