How to Pick Stocks Now For a Trump Presidency

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If Trump is elected president, the market will certainly see its share of tailwinds.

Here is a guide to policy issues and how to pick stocks before a potential Trump victory.

Trump’s stance on low corporate taxes lifts earnings immediately. Buy companies that derive most of their earnings from the U.S. and are therefore taxed there and buy companies that see outsized tax impacts. Analysts at RBC Capital Markets say Burlington saw the largest boost to earnings from the 2017 tax reform out of any global apparel and retail business in RBC’s coverage. That’s probably because Burlington’s  (BURL) - Get Burlington Stores, Inc. Report entire business is in the U.S.

With a Trump presidency, expect more trade tensions with China: and if there are more tariffs on Chinese goods coming into the U.S., consumer staples companies can often mitigate the impact better than discretionary companies can. That’s because staples companies, if they see cost pressure on, say, raw materials, can raise prices and consumer demand won’t be hurt much. Discretionary businesses are much more demand-sensitive. For staples, think Procter and Gamble  (PG) - Get Procter & Gamble Company Report or Coca-Cola  (KO) - Get Coca-Cola Company Report.

Trump will place less pressure on individual taxes, so look to buy stocks that benefit from a generally stronger economy, like consumer discretionary, energy, industrials, materials, and banks. In consumer discretionary, RBC likes Home Depot  (HD) - Get Home Depot, Inc. (HD) Report because home improvement demand will remain strong while travel and leisure may be pressured by the virus, should there be no vaccine yet.

To see the rest of the analysis, watch the quick video above.

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