The Best Investment Theme For The New Trump Presidency

There is no shortage of investing ideas being thrown around that could potentially do well under the new Trump administration – but what would actually work?

Last week, Donald Trump won the latest US Presidential Elections, which would see him be sworn in as the USA’s new President on 20 January 2025. Often, there’s a huge rush of investment themes that accompany the inauguration of a new political leader in a country. It’s no exception this time. 

For my own investment activities, the only theme I’m in favour of with the new Trump presidency – in fact, with any new presidency – is to look at a stock as a piece of a business, and assess the value of that business. Why? Because there’s a long history of investment themes accompanying shifts in political leadership that have soured. In a November 2014 article for The Motley Fool, Morgan Housel shared some examples:

“During the 1992 election, a popular argument was that Bill Clinton’s proposed remake of the U.S. healthcare system would be disastrous for pharmaceutical stocks… by the end of Clinton’s presidency pharmaceutical companies were some of the most valuable companies in the world. Pfizer increased 791% during Clinton’s presidency. Amgen surged 611%. Johnson & Johnson popped 385%. Merck jumped 299%. Those crushed the market, with the S&P 500 rising 251% from January 1993 to January 2001…

…During the 2000 election, Newsweek wrote that if George W. Bush wins, the ensuing tax changes could “help banks, brokers and other investment firms.” By the end of Bush’s second term, the KBW Bank Index had dropped almost 80%. The article also recommended pharmaceutical stocks thanks to Bush’s light touch on regulation. The NYSE Pharmaceutical Index lost nearly half its value during Bush’s presidency…

…During the 2008 election, many predicted that an Obama victory would be a win for green energy like solar and wind and a loss for big oil… The opposite happened: The iShares Clean Energy ETF is down 51% since then, while Chevron (CVX 0.10%) is up 110%.

During the 2012 election, Fox Business wrote that if Obama wins, “home builders such as Pulte and Toll Brothers could see increased demand for new homes due to a continuation of the Obama Administration’s efforts to limit foreclosures, keeping homeowners in their existing properties.” Their shares have underperformed the S&P 500 by 26 percentage points and 40 percentage points since then, respectively.”

It was more of the same in the presidential elections that came after Housel’s article.

When Trump won the 2016 US elections for his first term as President, CNBC proclaimed the banking sector as a strong beneficiary because of his promises to ease banking regulations. But from the day Trump was sworn into office (President-elects are typically sworn in on 20 January in the following year after the elections) till the time he stepped down four years later, the KBW Nasdaq Bank Index was up by less than 20%, whereas the S&P 500 was up by nearly 70%. The KBW Nasdaq Bank Index tracks the stock market performance of 24 of America’s largest banks.

CNBC surveyed more than 100 investment professionals shortly after Joe Biden won the 2020 elections. They thought that “consumer discretionary, industrials and financials will perform the best under a Biden administration.” From Biden’s first day as President till today, the S&P 500 is up by slightly under 60%. Meanwhile, the S&P 500 Consumer Discretionary Index, which comprises consumer discretionary companies within the S&P 500 index, has gained just around 30%. The Dow Jones Industrials Index (a collection of American industrial companies) and the KBW Nasdaq Bank Index are both also trailing the S&P 500 with their respective gains of around 40% and 20%.

I have no idea if the hot themes for Trump’s second term as President would end up performing well. But given the weight of the historical evidence, I have no interest in participating in them. Politics and investing seldom mix well.


Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. I don’t have a vested interest in any company mentioned. Holdings are subject to change at any time.

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