How Trump Made Domestic Cyclical Stocks Great Again

While the big move higher in the US stock market following the Trump victory – a move which it is safe to say virtually every so-called expert, with a few exceptions, called wrong – has been duly noted, and has since started to fizzle, the real story is what has happened below the market’s surface, where the rotations from one sector to another in the past three weeks have been unlike anything seen in years.
As David Kostin observes, divergences in sector performance following the election reflect an environment with noticeably higher return dispersion. Although the S&P 500 index level has risen just 2% since Election Day, sharp rotations have taken place under the surface of the market. The disparate returns of Banks ( 19%), Utilities (-6%), and High Tax stocks ( 7%) are just a few examples. Whether or not the market has accurately foreseen the implications of the incoming government’s policies, the magnitude of these price movements suggests return dispersion will be higher in 2017 than it was in 2016 as President-elect Trump’s new policies are implemented.

This post was published at Zero Hedge on Dec 4, 2016.