In the days leading up to the U.S. presidential election, many pundits had predicted steep market losses in the event of a Donald Trump win, but the reality has been anything but. As of market close on Tuesday, the S&P/TSX Composite Index had gained 0.7% since Election Day, while the U.S. market was up 2%. But these minor budges don't mean there weren't any major movements after the election results came in. Some companies and industries saw big swings, depending on whether investors felt they would either benefit or suffer from a Trump win.
Three broad sectors In the United States have experienced larger-than-market moves since Nov. 8: financials jumped by 6.9%, health-care stocks climbed by 3.4% and industrial companies rose by 4.8%. Financial companies climbed the most for two reasons: It's expected that Trump, despite railing against Wall Street, will reduce regulations on banks. Many people also think that interest rates will rise under a Trump presidency -- partly because of higher inflation, though he's also said that rates should be higher-- and that benefits financial companies, says Norman Raschkowan, president and portfolio manager at TenSquared Investments.
Health-care stocks moved higher after Trump's win, since there had been fears that Democratic candidate Hillary Clinton would cap drug prices. While her loss was good news for health-care equities in general, U.S. biotechnology stocks had a particularly positive day on Nov. 9, climbing by 7.8%. "There was a risk for price cuts," says Raschkowan, "but people are now saying that the environment is going to be better for these companies."
As for industrials, their move was a result of the potential US$500 billion in infrastructure spending that Trump has promised. This benefits construction and machinery operations. "Industrials are really the classic cyclical play as the economy gets juiced with fiscal stimulus," says Mitchell Goldberg, president of ClientFirst Strategy in Melville, N.Y.
While Canadian stocks didn't rise as much as their U.S. counterparts, the S&P/TSX Capped Financial Index rose 2.8% from Nov. 8 to Nov. 15. Notably, 
Sun Life Financial (SLF) and Manulife Financial (MFC) both climbed by over 8% the day after the election, while Alaris Royalty Corp. (AD), Power Financial Corp. (PWF) and Great-West Lifeco (GWO) all climbed between 2.2% and 3.2%. These companies tend to benefit when rates rise, and bond yields have climbed since Trump was elected. Stephen Lingard, senior vice president and portfolio manager for Franklin Templeton Solutions, points out that the yield on the 10-year U.S. Treasury bond climbed 27 basis points on the day after the vote to 2.02%, while the 10-year Government of Canada bond moved up by about 8 basis points. That has hurt bondholders, but it's good news for financials.
The post-election week has been a very volatile one for gold stocks; the S&P/TSX Global Gold Index climbed 2.6% on Nov. 9 but promptly dropped almost 14% over the two subsequent days, before regaining some of these losses. Lingard says that while gold could do better under Trump, "the situation is very fluid. Investors are saying that, at this point, there are some negatives and some positives. Maybe we don't know how to fully interpret it yet," he says.
The S&P/TSX energy sector sub-index was also in the black, rising 4.6% since the election. Going forward, it's expected that energy, base metal and other commodity companies in Canada will fare better under a Trump presidency. American infrastructure dollars should increase demand for commodities and find their way into pipeline projects, such as Keystone XL. "Naturally, some of these things will benefit Canadian incomes," says Daniel Schwanen, vice-president of research at the C.D. Howe Institute.
Of course, not everyone was happy about the election result. Perhaps surprisingly, some gun companies saw their stock prices tumble on Nov. 9. Smith & Wesson (SWHC) and Sturm Ruger & Co. (RGR) fell by 15% and 22%, respectively. The reason for the drop is somewhat counterintuitive, says Goldberg, but it's because Trump will be more favourable to gun ownership than Clinton would have been; as investors have seen after mass shootings, gun stocks and firearm sales tend to rise when people feel that their gun rights are threatened. These companies will still do well, "but they'll trade like higher price-to-earning discretionary stocks" instead of a company facing regulation, where people need to buy now before it's too late, says Goldberg.
American consumer staples stocks fared poorly as well. A number of packaged-food companies, such as Conagra Brands (CAG) and Hormel Foods Corp. (HRL), declined by more than 4% on Nov. 9, while technology companies like Netflix (NFLX) and Amazon.com (AMZN) also dropped by at least 4%. The interest-rate-sensitive utilities sector dropped as a result of rising bond yields, but also on the prospect of a rising Fed funds rate.
The tech sector saw its own declines due to the potential impact of a rising U.S. dollar on overseas sales, says Goldberg. Many companies in this industry have big international operations. If the dollar climbs on the prospect of higher growth -- perhaps resulting from Trump's promised corporate-tax rate cut -- overseas revenues will be worth less when converted into U.S. dollars. Many technology companies also hire from outside the country to fill many coding and programming positions. These companies could suffer if it becomes harder to bring in non-Americans, says Goldberg.
No matter what happens in the days ahead, investors shouldn't do anything drastic. Lingard suggests putting more money into cash and gold than bonds, in part because he expects bond investors to lose money as yields continue to rise. Equity investors may want to take another look at their allocations to real estate and utilities, but his main recommendations are patience and diversification. "Don't panic and stay diversified," he says. "And don't think of risk as just equity markets."
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