ABC News reported yesterday that President Trump contradicted 4 of his campaign positions in 1 day. It is not unusual for a politician to reverse some positions once the election is over, but the Trump administration’s progression since the election has been unusual, to say the least. After an impatient start that involved signing a record number of executive orders, Trump ran into a wall with his healthcare plans. Rather than try to climb the wall or find a door, he tried to break through it with his bare hands, but after hitting it a few times, he just gave up and walked away. Trump then reorganized his National Security Council, demoting his controversial advisor Steve Bannon. Now, I suspect that a lot of things he campaigned on are less likely to happen.
Meanwhile, the US stock market is at an all-time high. At least some of this market push has been tied to hopes for the Trump administration. Industrial metals are a great example. Industrial metals (JJM) had correlated fairly consistently with the rest of the commodities market (DJP), as is shown on the comparison chart below.
That was until November of 2016, when it shot up on hopes that Trump would invest in America’s infrastructure and build a “yuge” wall along the border between the U.S. and Mexico.
If no other major factors change, I wonder how long it will be before the market loses faith in the Trump administration and assets like industrial metals come back down to earth. Investors can be very impatient people. How long will they let JJM sit at $25 before they give up on Trump and congressional Republicans and move on to other speculations?
If you are looking to short Trump, there are plenty of investment ideas to choose from, but I would probably start with industrial metals. They jumped significantly in November due to excitement over Trump infrastructure. If there is any indication that the border wall or other Trump infrastructure plans are being scaled back, I expect JJM to retreat about 10%, back near where DJP is. I am not the biggest believer in long-term commodities investing anyway, so betting against it doesn’t feel too risky to me.
If you are looking to long Trump, you are late to the party. You are not going to get in at a good price unless there is a temporary pullback. Commodities are a very tricky investment without a good entry point, so you might want to approach it from the equity side. The Industrial Select Sector SPDR (XLI) is in a 4-day downtrend and may be positioned well for a Trump long position soon.