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These Sectors Are Gonna Be Yuge. Believe Me.

Twitter is Donald Trumps favorite mode of communication. Indeed, his economic prescriptions could fit into a single tweet: cut taxes and regs, erect trade and immigration barriers, boost defense, favor oil, confront China, embrace Russia.

What does all that mean for your portfolio?

I can provide you with a trading roadmap for a Trump administration, by answering this reader’s question:

“I’m thinking of investing in exchange-traded funds that will thrive under Trump. Which were the best-performing ETFs in 2016 and will they continue their momentum in the new year?” — James D.

I crunched the numbers and pinpointed a few of the most successful ETFs of 2016, all of which should continue their winning ways after Donald Trump’s inauguration in January. For these sector-based ETFs, Trump’s avowed policies will be manna from heaven.

However, whether you invest in these specific ETFs or not, their underlying sectors will offer some of the most promising growth opportunities of 2017.

Interestingly, a top performer this year has been the country-based VanEck Vectors Russia ETF (NYSE: RSX), which is up a staggering 42.8% year to date, nearly four times the YTD gain of 11% for the S&P 500.

Russia has dominated the headlines these days, amid mounting evidence that the cyber army of Russian President Vladimir Putin hacked the Democrats to help Trump.

Reminiscent of the 1962 Cold War thriller The Manchurian Candidate, the Democrats argue that Trump is tantamount to the Russian leader’s mole. Whether the president-elect is “The Trumpchurian Candidate” remains to be seen. Regardless, the surprise election of Putin’s preference as U.S. president should rebound to Russia’s favor, as Trump continues to appoint Russo-centric personnel to his cabinet and advisory circle.

Oil’s well in Mother Russia…

Putin

Another stellar performer has been the benchmark Energy Select Sector SPDR ETF (NYSE: XLE), which is up 25.9% YTD.

The common denominator for the “yuge” successes of RSX and XLE: rising oil prices.

As a petro-state heavily dependent on oil exports, Russia should continue to prosper in 2017 and beyond, as oil prices rebound and the Trump administration forges strong political, military and business relations with Putin. The energy patch and Mother Russia tend to rise (and fall) in tandem.

Robert Rapier, chief investment strategist of The Energy Strategist, asserts that the recent rise in oil prices has long-term momentum:

“Oil and fuel inventories in developed countries have been declining now for five months, suggesting that global demand might already exceed supply. And while everyone is focusing on how much U.S. shale production might grow over the next couple of years, it still accounts for only about 5% of global crude output.

Much more comes from onshore and offshore fields that haven’t seen the dramatic cost cuts that have buoyed shale. Demand growth, meanwhile, is running hotter than typical amid record gasoline consumption in the U.S. and continuing gains in India and China.”

Banks and technology: from laggards into leaders

The markets performed a 180-degree pivot halfway through 2016, with the leaders of the first half turning into laggards as the year wore on. In particular, the telecom, utilities and real estate sectors went from positive to negative territory, as greed replaced caution. First-half laggards such as technology and financial services are now outperforming.

The most stunning rotation was executed by financial services, as traders reacted to unexpectedly strong earnings reports, an imminent interest rate hike, economic recovery, and rising energy prices. Higher rates make it easier for banks to generate profits, while higher oil and gas prices lessen the risk from energy sector debt on bank balance sheets.

Investors also are giddy about the prospect of a laissez-faire businessman in the White House who is intent on deregulating financial services.

During the first six months of 2016, the benchmark Financial Select Sector SPDR ETF (NYSE: XLF) declined 2.18%. However, in the nearly six months since then, the XLF has soared 28% and it’s now up 22.2% year to date.

Another top performing ETF is the iShares PHLX Semiconductor ETF (NSDQ: SOXX), which has gained 38.6% YTD. The benchmark Technology Select Sector SPDR ETF (NYSE: XLK) is up 14.7% YTD.

Jim Pearce, chief investment strategist of Breakthrough Tech Profits and our flagship publication Personal Finance, sees growth for the tech sector next year but offers this caveat:

“The tech sector is nothing if not volatile, sending some stocks soaring to new heights while others circle the drain. That’s why we evaluate the companies we cover in Breakthrough Tech Profits objectively, because getting caught up in the beguiling promise of whiz-bang technologies usually ends badly.”

As I’ve discussed extensively in previous issues, another hot sector is aerospace/defense, which is on course for a multi-year boom as Trump launches a Pentagon spending spree. The SPDR S&P Aerospace & Defense ETF (NYSE: XAR) is up 21.9% YTD and it’s poised to continue its upward trajectory as terrorism fears and international tensions worsen.

Got any questions about the moneymaking opportunities under Trump’s New World Order? Email me at: mailbag@investingdaily.com. — John Persinos

Editors Note:

For a few more days Jim Pearce is keeping the doors open to a proprietary trading system called the Rapid Profits Matrix. If you’d like to claim a spot going into 2017, you can learn how to apply for membership right here. Please understand, there are no guarantees that your application to this program will be accepted. But if you do get a spot, Jim promises to average a triple-digit annualized winner every month for the next 12 months.


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