A hat in support of Republican Donald Trump, at the New York Stock Exchange, in New York, on Nov. 6.Andrew Kelly/Reuters
Globe readers are fine stock pickers. Turns out, they’re pretty good at predicting the next U.S. president, too.
Markets responded to Donald Trump’s resounding victory in last week’s U.S. presidential election with a mix of relief and exuberance: the divisive campaign had finally ended without unrest, and investors appeared to relish the prospect of Mr. Trump’s pro-growth policies, which favour low taxes and deregulation.
The Dow Jones Industrial Average surged by more than 1,500 points on Wednesday, the day after the election, for its biggest one-day gain in two years. Small-capitalization stocks roared like tigers. Big banks and big tech, in particular, seized the day with market-beating gains.
So how did the contributors to the second annual Globe and Mail Investing Club fare during this one-day bear hug – perhaps “bull hug” is a more appropriate term here – for the U.S. president?
Globe readers did very well, suggesting that they had a good read on stocks that would benefit from a change of leadership or even predicted that Mr. Trump would emerge victorious.
This competition kicked off on June 1, after we asked readers to submit three stock picks that would be held for one year. We then assembled the Readers’ Portfolio, which consists of the 10 most popular picks from these submissions.
To make things interesting, Globe reporters assembled their own 10-stock portfolio, which we call the Hot List.
We will announce the winning portfolio in June, along with individual standouts based on reader submissions. We’ll keep tabs on how things are progressing with performance updates along the way.
For this update, let’s drill down on one day of trading: the Readers’ Portfolio gained 3 per cent, with all stocks ending the day higher. The portfolio beat the S&P 500 and narrowly topped the Nasdaq Composite index.
Readers also whomped the Hot List, which, amazingly, ended the day where it began. Perhaps Globe reporters were anticipating a resounding victory by Kamala Harris.
For much of the presidential campaign this year, many investors were betting on the outcome of the election with several approaches that became part of the “Trump trade.”
If the results were delayed or contested, gold looked like a solid wager during a prolonged period of uncertainty. If Mr. Trump won, private prison stocks and crypto looked promising, while bonds didn’t.
And if Mr. Trump lost, well, Trump Media and Technology Group Corp. – the parent company of his Truth Social platform – looked like the obvious stock to bet against.
Globe readers took a different approach. Their portfolio favoured big U.S. technology companies such as Nvidia Corp. NVDA-Q, Amazon.com Inc. AMZN-Q and Microsoft Corp. MSFT-Q, along with Canadian-based companies like Celestica Inc. CLS-N and Shopify Inc. SHOP-T.
These stocks, which rallied an average of 4.3 per cent on Nov. 6, are bets that rest largely on the rising importance of artificial intelligence.
But there’s more going for these wagers now: the tech sector may be immune to the tariffs and trade restrictions that Mr. Trump is promising. The sector also stands to benefit from looser regulations, especially with Tesla Inc.’s Elon Musk in Mr. Trump’s orbit.
“The biggest thorn in the side for Big Tech over the last few years has been the head of the Federal Trade Commission, Lina Khan, who has challenged deals of all shapes and sizes in the tech sector,” Dan Ives, an analyst at Wedbush Securities, said in a note.
“The growing consensus view of the Street is that Khan will be out at the FTC under Trump and this could be a huge catalyst for more deal flow in the Big Tech landscape,” Mr. Ives said.
A single day’s performance might seem inconsequential for a stock-picking contest that runs 12 months. But if it signals profound changes that could occur after Mr. Trump takes control of the White House in January, it could provide an early indication of the some of the trends that are about to unfold.
There’s a lot left in this competition, and markets will have to navigate a U.S. leadership transition that could be chaotic. But on Nov. 6, Globe readers nailed it.