Which shares have done best from the Trump trade?

DONALD TRUMP’S victory on November 5th was decisive. The reaction of America’s stockmarket was jubilant. On November 6th the S&P 500, an index of America’s biggest firms, leapt by 2.5% in anticipation of lower taxes, less regulation and higher economic growth. The Russell 2000, an index of smaller listed companies, soared by 5.8%. Will the good times continue?

For now investors remain ebullient. But an analysis of the performance of the 3,000 biggest American public companies shows that the Trump rally has been uneven. And some “Trump trades” have proved less profitable than anticipated.

Of the dozens of stockmarket sectors tipped to do well under a second Trump administration, three have enjoyed big post-election gains: financial services, private prisons and cryptocurrencies. Banks were expected to benefit from a Trump win because of less regulatory scrutiny of mergers and acquisitions, an easing of capital and liquidity requirements and higher interest rates. So far the bet has paid off. Shares in big banks are up by 10% compared with before his victory; regional-bank shares have risen by about the same amount. Investment banks and private-equity funds have also gained on the hope that Mr Trump’s light-touch approach to antitrust enforcement could lead to an M&A boom.

Private prison firms were another popular bet. Mr Trump has vowed to launch a massive programme to deport illegal immigrants. Although the American armed forces may be involved in such an operation, the government is expected to outsource much of the work to private firms. GEO Group and CoreCivic are two of the biggest prison operators that track and detain illegal immigrants for America’s Immigration and Customs Enforcement agency. Shares in GEO and CoreCivic soared on the day after the election and remain up by 91% and 64%, respectively.

A third sector that many investors believed would profit from Mr Trump’s win is cryptocurrencies. During the campaign Mr Trump pledged to create a bitcoin “strategic reserve” and to make America the “crypto capital of the planet”. Since the election, the price of bitcoin has surged by 45%, to nearly $100,000 per token, and companies involved in minting and trading digital currencies have rallied. Shares in Coinbase, a cryptocurrency exchange, jumped by nearly a third on the day after the vote and have climbed by a total of 56% since the election. Companies that “mine” bitcoin, such as MARA Holdings, Riot Platforms and CleanSpark, have seen their shares jump by 20-50%.

But some Trump trades have been duds. Shares of American steel companies rose by 13% after election day on speculation that Mr Trump would protect the industry from imports and boost domestic demand. Since then prices have fallen by 8% because investors are unsure what impact Mr Trump’s policies will actually have. Similarly, oil and gas drillers, whose shares are down by nearly a quarter this year, rose by 8% in the hours after the election on the hope that a president who espoused “drill, baby, drill” might revive their fortunes. (Clean-energy stocks fell 6.5%.) Alas, that rally was short-lived, too. And Trump Media & Technology Group, the president-elect’s social-media firm, worth $7bn, climbed by 6% on election day but has tumbled by 14% since. Investing in Mr Trump does not always pay off.■