By Alan Valdes, director of floor operations at Silverbear
Now the work begins. All those campaign promises that helped propel the Dow (^DJI) to all-time highs will be put to the test in the next 100 days. Wall Street will be watching closely to see if President Trump can turn those promises into realities, and he has a pretty ambitious 100 days ahead.
According to those on the Trump team, it starts Sunday. The president is rumored to be ready to undo at least 200 regulations with the swipe of a pen. These regulations have been strangling small businesses while adding a hidden tax of $1.8 billion to the economy. Small businesses in particular are an easy fix and a smart start. The big hurdles will take time to work through Congress.
Don’t start planning your portfolio base on a quick fix with the Affordable Care Act. Expect major push backs from the opposition as the Republicans attempt to repeal and replace this costly and inefficient national health care system. Real change may not come until 2020. There are better areas short-term to place your money while President Trump and Congress work this out until the dust settles. I am a seller of the health-care sector (XLV).
Trump plans on a $1 trillion infrastructure project for the country—one that would use both private and public funding. His plan includes a tax credit up to 82% on equity amounts. Banks, insurance companies and pension funds are all starting to line up and participate in what looks like a $175 billion private sector opening that will be leveraged at 5 to 1. Unlike Obamacare, this project has bipartisan support. We could see movement by early spring 2017. The stocks that could start seeing a bump:
Aecom (ACM): Not a name most investors are familiar with, Aecom is a leader in engineering, providing technology designs, planning, consulting and construction.
US Steel (X): The biggest raw steel producer in the US, this company rolls out 22 million net tons of steel a year.
Caterpillar Tractor (CAT): No infrastructure project could start without this yellow army of earth movers. Whether it’s digging, moving, or lifting, the world’s number one company of earth movers will most certainly be on the job.
Vulcan (VMC): This one’s my favorite (disclosure: it’s also in my portfolio). The roads to just about everywhere most probably contains a Vulcan product. Vulcan produces crushed stone, gravel, sand, asphalt mix, calcium and ready-mix cement. With over 340 facilities in 20 states, their product can be on a job site within hours.
Tax cuts, as well as infrastructure, have support from both sides of the aisle. Cuts could be introduced as early as this summer. Trump is calling on a reduction on corporate taxes from 35% (one of the world’s highest) to 18% and simplifying the 2.4 million-word tax code. This, if implemented, would be the biggest catalyst to push the market higher. As in the past, tax cuts put more money in consumers’ pockets. In an economy that is powered by consumer spending, this is a win-win for “Making America Great Again!”