The Trump victory, although a shock to the world had little effect on global markets, mainly due to the lack of transparency from the Trump administration, regarding fiscal and trade policies, as well as indications of financial deregulation, and the repeal of the Affordable Care Act. Although a Trump presidency still brings uncertainty, at Samra Wealth Management, we advise our investors not to stay on the sidelines and recommend increasing allocations towards Technology, Healthcare, Industrials and Financials.
Although technological innovation and transformation is little affected by the new administration, the Tech Sector could stand to benefit greatly from lower corporate taxes, leading to repatriation of cash held overseas. Combined with attractive valuations the Tech Sector continues to return capital to shareholders, and we expect to see this trend continue for the long-term as demand for digital data, cyber security and mobile technology continues to experience exponential growth. We also expect to see increased activity in the Technology Sector as it relates to adapting to climate change, as Millennials focus on the need for social responsibility.
Mr. Trump has indicated a repeal of the Affordable Care Act, we believe this is highly unlikely, and the Healthcare Sector will continue to see double digit growth in 2017. Although we do expect to see some changes to the Affordable Care Act, these changes would assist the Healthcare Sector. The most favorable of these prospective changes would be some form of Health Savings Account, allowing individuals to dedicate tax deferred income specifically towards their healthcare needs. Repealing the Affordable Care Act would have a detrimental effect on the economy, at risk would be (1) 20 million Americans would lose healthcare coverage, as a result the insurance companies would lose 20 million customers; (2) Insurance companies would lose Federal Subsidies, they have calculated into their projections, given the large capital investments they made with the advent of the Affordable Care Act; (3) The Government would lose the $13.9 Billion in Affordable Care Act tax income.
During the election circuit, President Elect Trump made it clear, he has a plan to improve the countries crumbling infrastructure. Although his plans to improve roads, bridges and airports has gained national attention, Trump has yet to provide a concrete plan on how to pay for this plan. Regardless, given Republicans and Democrats both agree on the need for infrastructure investment, it is likely, some form of Trumps $1 trillion plan over 10 years will move forward. Along with Trumps Plan to strengthen the military, 2017 should prove a great year for Industrials.
With the three major indexes closing at record highs this month, the Financial Sector is picked to be one of the top performing sectors for 2017. Although strong valuations and economic data support this growth trend, Wall Street has high hopes with Donald Trump. As Trump has promised to repeal Dodd-Frank and the Volcker Rule, eliminating trading and investment restrictions implemented by the Obama administration. Although a complete repeal would be difficult, the suggestion alone indicates Trumps friendly attitude towards Wall Street.
Given Trumps surprise victory, most investors questions: where to find value, and how to correctly allocate their portfolios to benefit from the incoming administration. We stand with our prior months’ conviction of increased allocations towards: Technology, Healthcare, Industrials and add Financials; given the potential for financial sector reform. For conservative investors we recommend high-yield corporate bonds and TIPS to hedge against expected increases in inflation. In this rising interest rate environment, with the energy sector leading volatility, it is important for our clients to understand that although the United States Equity markets are favorable, we continue to recommend allocations in select foreign markets, with the addition of Alternative Investments (AI) to help dampen volatility.
All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor
Samra Wealth Management, A Member of Advisory Services Network, LLC