The events of this Election Day and the ascension of Donald Trump represent a political triumph by an old economic model, the resources and TV at the center of the country, over the bicoastal Internet economy of Barack Obama.
It reminds me of 1976, when Jimmy Carter led a manufacturing and trading rebellion against the oil boom in Houston, when I was getting my degree from Rice University. What I didn’t realize, sitting amidst all those new skyscrapers, was how badly trading centers on the coasts were hurting. The real estate recession that began in 1974 would continue through the decade.
After the 1976 election, of course, oil men redoubled their efforts to take political power. They succeeded, in 1978 and 1980, then dominated our politics from that day to this. From that perspective, Trump is a “Bizarro World” version of Jimmy Carter.
But history doesn’t repeat, it can only rhyme.
What does Donald Trump mean to investors in 2017 and beyond?
The Oil Economy
The oil economy includes both the production and consumption of resources.
It’s not just buy Pioneer Natural Resources (NYSE:PXD), EOG Resources Inc (NYSE:EOG) and Philips 66 (NYSE:PSX). This should mean big gains on the consumption side of the equation, for suburban homebuilders like Toll Brothers Inc. (NYSE:TOL) and automakers like Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM).
Obviously, this is big news for defense stocks like Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC) and Boeing Co (NYSE:BA). A world marked by growing nationalism is going to mean huge sales, not just to the U.S. military but to military people around the world.
The knee-jerk reaction is going to be selling tech stocks, especially companies like Alphabet Inc (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB). If you have a time horizon of a year or two, and especially if you still have a gain in these stocks after today, it may be time to take profits.
If you are an investor with a five-year time horizon or longer, however, you may want to pick up some bargains. Hunker down and know that the future is inevitable. Things like self-driving cars, self-running factories, and immersive, virtual reality gaming … they are all in our future.
Economic forces work their will. It just takes time.
Buy China
The most important investment call I can make is that you buy China.
China has a large, and still growing, domestic economy, under an unshakeable state that controls its Internet. China is the model every other country will be following going forward.
Over time, I think this leads to a balkanization of the Internet, and a true global recession. But China should skate through, helped by the growing economies of Southeast Asia around it, where one-quarter of the world’s people live.
So, Aliababa Group Holding Ltd (NYSE:BABA). So, Weibo Corp (ADR) (NASDAQ:WB). So, Trina Solar Limited (ADR) (NYSE:TSL). So, the SPDR S&P China (ETF) (NYSEARCA:GXC) and other instruments that give you access to the Chinese economy. China is going to drop the chips America is leaving on the table, so maybe pick up some Las Vegas Sands Corp. (NYSE:LVS) as well.
A Bumpy Night
The natural impulse in the face of a shock like today is to sell, sell, sell.
Lots of investors will be doing that this morning, adjusting their portfolios to an unexpected reality, talking up global nationalism and tension, wondering where Wall Street got things so wrong.
It’s more important to note that, in the longer run, the economy drives politics and not the other way around. Donald Trump can no longer halt the Internet economy with his bluster than Jimmy Carter could halt the rise of oil with a cardigan sweater.
But for now, that’s the world we live and invest in.
Dana Blankenhorn is a financial journalist and author of the science fiction story Into the Cloud. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he was long AMZN, FB and GOOGL.
