Hold the phone, folks! We can talk about the resilience of the “Big Oil” industry. We can find strengths in the financials and acknowledge the uptick in the broader energy markets. We can reconcile our investments knowing that a company like Exxon Mobil Corporation (NYSE:XOM) will never perish. All of those are great points. But they all pale to what just happened on election night.
In a stunning turn of events, a subdued gathering of Donald Trump supporters eventually turned raucous as the outspoken real estate mogul pulled off an upset victory. Donald Trump, in a little over two months, will become the next President of the United States.
Let me repeat — the former host of “The Apprentice” will be the leader of the free world. While this has shocked most people and countries not named Russia, there are significant players that are happy to see “The Donald” reign supreme. Exxon Mobil and the rest of the big oil machinery are prime examples.
XOM Stock and the Donald Trump Boost
The morning after, XOM stock had one of the biggest intra-day pops over the past several months, gaining nearly 3%. Against the prior day’s close, XOM stock moved up 1%. Fierce rival Chevron Corporation (NYSE:CVX) also had a strong intra-day session, moving up 2%. Although CVX didn’t gain too much from the prior day, in the past two weeks, shares are up over 6%.
But it’s not just Exxon Mobil and the oil elites that are beneficiaries of the Donald Trump market rally. Smaller companies like ConocoPhillips (NYSE:COP), Phillips 66 (NYSE:PSX), Chesapeake Energy Corporation (NYSE:CHK), and Marathon Oil Corporation (NYSE:MRO) have reacted superbly to the news. Clearly, the big players like XOM down to the smaller, independent firms see something in a Trump administration that others don’t.
Click to EnlargeBut what exactly is it? To be fair, the second-half of this year hasn’t been too kind for XOM stock. Since the first of July, Exxon shares are down more than 6%. This is in spite of Wednesday’s arguably unexpected jump.
Another peculiarity is that since August, XOM stock has been unable to successfully crack the $88 resistance level. Without the Donald Trump victory, I don’t think you will get the oil enthusiasm.
This is further confirmed by the oil market’s lack of any earth-shattering moves. The international benchmark Brent Crude Oil gained 1% from the session two days ago. West Texas Intermediate, or light crude oil, also had a 1% day. Again, without Donald Trump, it’s just another day for Exxon Mobil.
Trump Administration Will Be “Soft” on Exxon Mobil
Like Russia’s Vladimir Putin, XOM was quick to make its feelings known about the shift in power. According to Reuters, Exxon representative Alan Jeffers stated, “We intend to work constructively with the president-elect and his administration.” Translated to human-talk, “we’re pleased as punch that you’re President and we also believe that climate change is a Chinese conspiracy. Long live Donald Trump and XOM stock!”
While that’s a bit of comedic hyperbole, at a basic level, it’s the reality of the situation.
Trump has long talked about energy independence and putting Americans back to work. That can’t happen if you hinder companies like Exxon Mobil. Certainly, it doesn’t look good on a potential reelection campaign if the XOM chief executive voiced disapproval. So there’s no way to make good on the “Make America Great Again” slogan without cutting back on the environmental regulations.
The pressure to appease big oil is further heightened because of the Middle East, and the posture of a Donald Trump administration. Energy independence is a cash flow threat to the Organization of the Petroleum Exporting Countries.
Let’s also frankly address the fact that the controversial President-elect has made tough remarks about Muslims. Since most OPEC member states have Muslim-majority populations, they’re not too keen on Trump. Whether he admits it or not — probably not — Exxon has leverage on “The Donald.”
XOM Stock Has a Bright Future
Since Hillary Clinton won the popular vote, it’s safe to assume that most Americans aren’t happy with the election results. For many, it’s a repeat of the Al Gore-George W. Bush battle royale. But if I may offer condolences to those that are hurting, a Trump administration will more than likely boost profits for specific sectors. So while your heart may break, your 401k will be singing a different tune.
XOM stock is uniquely positioned for a rally in 2017 and beyond. For a Republican to stymie Exxon Mobil is like a Democrat ignoring immigrants. There are just some things that are part and parcel of each political party. But XOM goes a step further by being one of few, if any, voices to which Trump has to listen — or risk “big league” troubles.
With a sharply divided nation, he’ll need all the friends he can get.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.