Donald Trump Elected 45th President of the United States. One thing is abundantly clear: the American electorate is deeply divided. The key to success for the next president will rest on the marshaling of a majority in the House and Senate on Tuesday night. These elections have laid bare a divide that has the potential to lead to something that is not familiar. There is a palpable sense of anger and hostility and uncertainty in the air - nearly everywhere.
Opportunity is knocking
It is precisely at moments like these that opportunity presents itself. The next resident of the White House, regardless of party, will have a clear mandate to invest heavily in US infrastructure. Think steel and cement. Seasoned investors should look no further than US Steel (X). On Friday, the ninth day of the longest selloff in U.S. equity markets since 1980, US Steel jumped $0.66, or 3.44%, on surging volume. Steel posts a P/E of -2.03. Not pretty. However, when—not if—the federal infrastructure spending plan takes shape in coming months you can be sure that coming quarters will likely reflect a more attractive P/E.
Aggressive investors made that point under the radar on Friday. Another candidate for outperformance in the coming days of infrastructure investment is Martin Marietta Materials (MLM). On Friday (again in a down market), MLM gained $3.85, or 2.04%. MLM’s P/E is a considerably more expensive 30.25. However, given the near certainty of massive Federal spending on infrastructure, MLM could well see margin expansion, not to mention price appreciation in coming quarters.
Away from the presidential elections, we have a relatively light economic calendar this week. Tuesday we receive the NFIB Small business Optimism Index. Bloomberg Consensus is calling for 94.3 versus last month’s 94.1. On Wednesday we receive Wholesale Trade (c. 0.2%) and the EIA Petroleum Status Report. Last week we saw a significant inventory build of crude of 14.4M barrels. Another build of anything even close to last week will provide significant pressure on crude in its attempt to establish a tradable bottom. Consumer Sentiment is released on Friday. There is no change expected from the previous reading of 87.2.
Earnings season continues to provide some tradable themes for investors this week. Chain store earnings along with quarterly results from Disney, NetEase, Nvidia and Acacia Communications will provide highlights.
Whatever sharp market reaction happens on and after November 8 likely won’t all be due to the election, Kenny said. Thanks to stretched valuations, technically weak markets and major averages trading below their 50-day moving averages, markets are already in a compromised position. Kenny’s Commentary on Fox Business News - November 2, 2016
In the Media on Election Night:
Stock markets in Asia and Europe also moved solidly lower as traders around the world kept a keen eye on the future of the U.S. political landscape. In short, the election’s outcome had traders around the globe scrambling for cover, said Peter Kenny, senior market strategist at Global Markets Advisory Group.
“His potential presidency brings with it many variable not yet priced into the economic narrative from trade, to trade pacts, to multi-national economic agreements, and mutual defense agreements,” he explained. Kenny’s Commentary on Fox Business News - November 8, 2016 http://www.foxbusiness.com/markets/2016/11/08/financial-markets-jittery-on-early-election-results.html
Reaction from Asia: “Trump elected stunned global capital markets staging Brexit 2.0” on Tencent (in mandarin) http://finance.qq.com/a/20161109/031221.htm