For half of the nation, the final results of the 2016 election were as stunning as they were traumatizing. Naturally, millions of Americans have had a visceral reaction to Donald Trump winning the presidency. Some took the unfortunate route of violence and civil disorder. Others have chosen a more creative approach, appealing to the Electoral College to reverse the will of the people.
I admire the passion that young Americans have towards politics. It would be even better had they applied that energy to actually voting. Nevertheless, regardless of whichever side you stand, one thing should be crystal clear — calls for the ouster of Donald Trump is a complete waste of time. The Electoral College has never overturned a presidential election, and they’re not going to start now. However, it is time to consider stocks to sell.
Unlike other presidential administrations, the Donald Trump mandate has no interest in appeasement for appeasement’s sake. The real estate mogul has run a campaign full of tough rhetoric against China, Mexico, Japan and even the vaunted NATO alliance. With such unprecedented bluntness, many world leaders have no idea what to expect from the President-elect. One outcome — or consequence, depending upon your perspective — of this rhetoric is that the markets have been splintered.
On one hand, you have the stocks to buy — construction companies, defense contractors and financial institutions. Under business friendly Republican leadership, these sectors and others should enjoy a less fettered regulatory environment. On the other side, you have the stocks to sell — namely, foreign companies and anything that will be vulnerable to rising interest rates. This could be anything from bond market exchange-traded funds to real estate investment trusts.
However, there are many other stocks to sell, and some may not be so obvious. This was an election of firsts, after all, so we shouldn’t expect much predictability in the markets as well.
Here are three stocks that you definitely want to avoid under a Donald Trump White House.
Stocks to Sell: Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (TSM)
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If I may be honest, any company from Asia — with few exceptions — should be considered stocks to sell. There is a tendency to view Asian competition as a form of “yellow peril” and Donald Trump’s campaign messaging probably didn’t do too many favors in that department.
But technology firms like Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) are especially at risk for unpredictable trading.
First off, several names within the sector didn’t react positively to Trump’s unexpected victory party. Market Vectors Semiconductor ETF (NYSEARCA:SMH) slipped 1% post-election, while tech juggernaut Intel Corp (NASDAQ:INTC) has been mostly flat since that fateful day. That immediately puts TSM under the pressure of association. With the competition in semiconductors being as tough and tight as it is, Taiwan Semiconductor doesn’t need the extra distraction.
Another aspect to consider is the company’s overall strong performance so far this year, up over 31%.
Shrewd shareholders may look at the political environment in the U.S. and be tempted to sell out of TSM. This argument is more compelling when you examine the technicals closely. Taiwan Semiconductor is still down 5% after the election. Shares are also below its 50-day moving average, a common gauge of nearer-term health.
The obvious play is to secure profits from TSM stock ahead of an uncertain future. That makes me particularly leery of Taiwan Semiconductor when Donald Trump takes the reigns.
Stocks to Sell: Sturm Ruger & Company Inc (RGR)
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Republicans love guns and guns love Republicans. Given this basic relationship, why is Sturm Ruger & Company Inc. (NYSE:RGR) one of the stocks to sell? This is a classic case where “good news is bad news.”
With Donald Trump securing an endorsement by the National Rifle Association, there’s no way he would attack the Second Amendment. But by not attacking it, he’ll take away one of the primal incentives to buy a gun to begin with.
During President Obama’s administration, sales for RGR and other gun manufacturers would often spike following a mass shooting. This stemmed from fears that the Democrats would introduce legislation curtailing gun owners’ rights. The end result was unprecedented demand for RGR and its competitors.
It was also an opportunity for entities up and down the firearm supply chain to hawk higher ticket items like AR-15s or AK-47s. Get them before the government bans them! However, that message will fall flat under the Trump administration.
RGR will also have a problem with its pricing. They’re on the higher end of the spectrum; for example, their cheapest AR-15 rifle has a retail price of $800. But if there’s no hurry to get one, there are several companies that can offer a similar quality rifle for significantly less money. In addition, a new law will go into effect in California that will ban AR-15 sales. That’s an entire state of sales for RGR that will simply disappear.
Sometimes, there’s too much of a good thing. Republican dominance in the government ironically is the unwanted headwind for RGR.
Stocks to Sell: iShares Dow Jones US Real Estate (ETF) (IYR)
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I have no doubt that Donald Trump will make America great again. The question, though, is how it will all come about. I err on the side of caution — some sectors will do really well, while others will do very poorly.
However, the President-elect often gives the impression that he can pay Paul without robbing Peter. That’s where I have my doubts, and that’s why the iShares Dow Jones US Real Estate (ETF) (NYSEARCA:IYR) is one of the stocks to sell.
Millions of Americans across key battleground states apparently appreciated Trump’s tough talk not only against other countries, but even towards our own U.S. Federal Reserve. The 2016 election will probably be the only one where the Fed chair is just as much a target as the opposition party’s candidate. It certainly made for great fanfare.
However, at the end of the day, attacking Fed policy means demanding higher interest rates. That’s a net negative for IYR.
The technical confirmation is littered on the charts. Year-to-date, IYR is down 1% — well below the broader benchmark. Furthermore, IYR has been stuck inside a sharply declining trend channel. Post-election day, IYR fell 2% under heavy volume. In fact, the bearish volume level for Nov. 10 was the steepest compared to any other session this year.
That’s a major sign of no-confidence for IYR, and there’s no point in trying to play the contrarian hero.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
