November Surprise Rallies Stocks

SPECIAL NOTE: There was supposed to be an epic collapse if Donald Trump won the presidency…and yet the market just had one of its best weeks in a long time. What gives? In this month’s Zacks Ultimate Live Webinar, Steve & Kevin explained the reaction and what investors can expect now that this major uncertainty has been removed. Learn which sectors are set to benefit and get a couple recommendations by watching the full event right here.

This week started with a rally based on the assumption that Hillary Clinton would win the election, and the week ended with a rally based on the certainty that Donald Trump had surprisingly won. In the end, the market just wanted to know one way or the other. Once that happened, the floodgates opened and the major indices put together some of the best performances of the whole year.

The S&P finished this week up 3.8%, as did the NASDAQ. But the star among the Big 3 was really the Dow, which climbed 5.4% over the past five days. Even the small-cap Russell 2000 surged. It was the first major breakthrough that we’ve seen in a while, and now we’re left to wonder what comes next.

For Friday, the S&P declined by 0.14% to 2164.5, but the Dow hit another new high with an advance of 0.21% to 18,847.7. The NASDAQ lagged its counterparts on Thursday, but today it jumped by 0.54% to 5237.1.

The market will continue to be nervous about Trump, but the shock is wearing off. He’s the President-Elect…so now what? The editors are starting to get their portfolios in line with the incoming administration. ETF Investor added three positions on Friday that should get a boost from the new agenda. Tactical Trader expects biotech and big-cap pharma to perform well, so it added a couple positions to capitalize. Reitmeister Trading Alert and Insider Trader also bought today, while Surprise Trader sold a position for a double digit gain. More on all this below:


A 22% Winner in 2 Days!

→ Good reports may finally be translating into good trading now that the election is over. Case in point, NVIDIA Corp. (NVDA) had a “fantastic” earnings report after the bell yesterday, leading to a double-digit surge for the visual computing company today. Eric decided to sell half of the position on Friday to lock in some gains. The sale brought a return of 22.1% to Surprise Trader…in just 2 days!


Today's Portfolio Highlights:

• If you’re looking for a “Make America Great Again’ ETF…then Eric thinks you should check out First Trust RBA American Industrial Renaissance ETF (AIRR). This fund focuses on small and micro cap industrial companies in the U.S. Basically, it seeks out American ‘winners’ in the industrial world by excluding companies with non-U.S. sales greater than 25% and companies without positive 12-month forward earnings. This was one of three names the editor added to ETF Investor on Friday as he adjusts the portfolio to a Donald Trump presidency.

He also picked up PowerShares Dynamic Building & Construction ETF (PKB) to capitalize on the likely burst in infrastructure spending. Eric thinks this would be a good place for the new president to start his agenda, since both parties are in agreement that the nation’s roads, bridges, etc. need a lot of help. Unlike most infrastructure ETFs, PKB doesn’t focus on the slumping high-yield sectors, but instead on building materials and engineering firms. It’s also a balanced fund that invests solely in American companies.

Finally, Eric wants to capitalize on the so-called ‘bromance’ between our new president and Vladimir Putin. Trump may help to thaw relations between the U.S. and Russia, and get the latter back on the world stage. If successful, then VanEck Vectors Russia ETF (RSX) should benefit. Russian stocks are incredibly cheap right now, and the potential relief from sanctions should be a big boon to this fund. Read the full write-up for more on each of these additions, and learn about the positions that were recently sold.

• Kevin expects biotech and big-cap pharma to outperform in the next few months. Therefore, the editor of Tactical Trader added 5% positions in SPDR Biotech ETF (XBI) and PowerShares Dynamic Pharma ETF (PJP). These ETFs give the portfolio immediate, conservative exposure to these spaces without single-stock biotech risk. Read the complete commentary for more on these moves.

• If people would just read past the headlines, they’d have a leg up on much of the market. For example, shares of CommScope (COMM) dropped on Friday on fears of a secondary offering…but what really happened was a private sale of shares from an investment firm. Steve does read past the headlines, so he saw today’s dip as a great opportunity to add a company that ‘s been on his radar for a while. COMM is a telecom and infrastructure management solutions company, which means it’s in the top 20% of the Zacks Industry Rank. It beat earnings expectations by 14% in its most recent report, and has Zacks Style Scores of “A” for Value, Growth and VGM. Steve thinks this approximately $33 company could rise to $40 or more next year. So he added it to Reitmeister Trading Alert on Friday with a 7% allocation. Learn more in the full write-up.

• The banks have soared since the presidential election, but Tracey still thinks this space is “the place to be”. So when two directors from WesBanco (WSBC) recently bought shares of their own company, she decided to add a position in the name for Insider Trader. WSBC is a commercial bank that recently closed an acquisition that expanded its presence in Indiana and Kentucky. It had a solid third quarter with 5% organic loan growth. The editor put about 10% of the portfolio into this position, and might have more buys next week as the insiders react to the Trump victory. Get a lot more specifics in the complete commentary.

• "I have to say, not only was the media wrong on who would win (it would be hard to be any more wrong than they were during this campaign/election), but they were also wrong on what would happen to the markets if Trump won. The media painted a picture of doom and gloom. Instead we saw a market surge higher with many stocks making new highs in the process.

"While President-elect Trump's economic plan is definitely considered pro-growth, e.g., tax cut for the middle class, reducing the corporate tax rate and thereby creating an incentive for US companies to repatriate overseas profits and promote investment and jobs back home, and reducing onerous regulations; some of the market's surge is simply relief that the long and exhausting election is finally over and the market can get back to moving on market moving news such as earnings and economic reports.

"And the economic news is quite good given that we've been in a long-standing uptrend, with near full employment, low interest rates, and the economy tracking at a 3% GDP rate. As the economy moves forward, so should the market," said Kevin in Options Trader.

Have a Great Weekend and Happy Veterans Day,
Jim Giaquinto
 

Recommendations from Zacks' Private Portfolios:

Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' exclusive recommendation services. If you would like to follow the Buy and Sell signals in real time, we've made a special arrangement for you.

Starting today you can see all the recommendations from all of Zacks' portfolios, from value stocks and momentum trades to "insider buying" and positive earnings surprises (which we've predicted with 80%+ accuracy), you can gain unrestricted access to our best ideas for the next month.
Click here to find out more >>

 
Zacks Investment Research