There’s been significant dispersion in sector performance since the U.S. election results, including Thursday’s action. Banks benefited most from the steepening yield curve and the post-election theme of a reduced regulatory burden for financial institutions. Again, this is the lean, but no one knows for sure.
Industrials have also outperformed, with infrastructure plays such as engineering and construction (E&Cs) and machinery benefiting most. Industrial metals have also been stronger — specifically, steel, copper and aluminum names — largely on the promises that President-elect Donald Trump will focus on rebuilding America’s infrastructure. This theory would, of course, contrast with the new administration’s possible shift on international trade and an exit from NAFTA, which would certainly hurt global industrial companies.
My system senses that the large run-up in the industrial sector following the election results is reaching an extended climax and could be in for a pullback. We will take advantage of that by buying puts in The Industrial Select Sector SPDR Fund (NYSEARCA:XLI).
Buy the XLI Dec. 16th $60 puts at $0.90 limit.