Why Big Banks Love Trump

The Trump tailwind is about to blow through lower Manhattan, and when it does, there will be one group of smiling souls… Big Banks.

Now, before we go any further, know that I am a huge proponent of Big Banks. Not only am I a veteran of one, having formerly worked for Morgan Stanley and at the World Trade Center, but I am also a philosophic advocate of the role Big Banks play in human action.

You see, you can’t have capitalism with the “capital,” and capital is what Big Banks provide. And as much as this industry is hated by a segment of society that wants to demonize the effective use of capital in the pursuit of profit, that hate is not only terribly misguided and vengeful, but it also reflects a stunning lack of knowledge about how markets and the economy function.

Still, the question remains: Why do Big Banks love Trump?

The answer is perhaps best revealed by one of the best banking and financial sector analysts out there, Wells Fargo’s Mike Mayo. In a note to clients, Mayo wrote that Trump’s victory will be a “regulatory game changer” for the banking sector. Mayo added that the new Trump administration could mean “more free markets, less harsh oversight” and reduced regulatory risk.

More free markets and more capitalism equals more freedom. And more freedom equals a more virtuous society.

This is the kind of milieu that would almost certainly stimulate investment banking revenue and loan growth, as it would represent a return to an explicit, pro-business mentality, one that has been sublimated in recent years by the Biden administration.

So, from a practical, “What’s in it for Moi?” angle (you know I look at the world through these lenses), how can we, as investors, make more money in this space?

The answer here is there are multiple ways to play the love between Big Banks and a new Trump regulatory framework, all of which I consider sound.

First, you can buy the biggest exchange-traded funds (ETFs) pegged to the fate of the financial sector. Here, I would look at funds whose holdings contain the Big Banks, which include the Financial Select Sector SPDR Fund (XLF) and the Invesco KBW Bank ETF (KBWB).

Both of these ETFs hold the biggest and the best of the Big Banks, including Goldman Sachs (GS), JPMorgan Chase & Co. (JPM), Bank of America (BAC), Morgan Stanley (MS) and Wells Fargo (WFC) to name just a few. Yet, both hold different banks and financial institutions at different percentages, so you aren’t owning the exact same stocks within these two funds.

More aggressive investors may also want to consider leveraged ETFs in the sector. For example, the ProShares Ultra Financials (UYG) seeks to deliver twice the daily performance of its underlying benchmark index, the S&P Financial Select Sector Index. So, if the S&P Financial Select Sector Index is up 2%, then UYG is designed to move higher by 4%.

Chart courtesy of www.stockcharts.com

Keep in mind, however, that if you use a leveraged fund such as UYG (or any leveraged ETF), it should only be used as a trading vehicle, not as a core holding.

Here’s an example of a short-term move in UYG. Since its close on Nov. 4, one session before Election Day, the fund has spiked nearly 14%! Indeed, you can see that big gap higher in the shares in the chart above.

Here we have a demonstration of why Big Banks love Trump, and how investors can bathe in the afterglow of that love.

Let’s just hope that love can be nurtured over the course of the next four years, and let’s hope it’s not tainted by what I consider to be very perilous chatter on the tariff front. Oh, and trust me, the tariff topic will be the subject of this column in the weeks and months to come, so prepare for the fight.

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ETF Talk: ‘Consuming’ a Consumer Discretionary ETF

Sometimes, consumption is good.

Indeed, with the rate of inflation finally falling and the holiday season — especially Black Friday — almost among us, it seems very likely that this time of year will see its usual boom in conspicuous consumption.

The data seem to bear out this trajectory. Walmart’s (NYSE: WMT) most recent earnings call revealed that the company beat on both the earnings-per-share (EPS) and revenue front, with analysts pointing to a mix of strong consumer confidence, reduced inflation pressures, holiday promotions and lingering demand as the causes of WMT’s strong sales figures.

On the other side of this proverbial Janus-faced scenario are analysts who point out the presence of economic uncertainties such as the continued presence of inflation and record levels of consumer debt — two things that will undoubtedly have a real, but still-yet-to-be-determined effect on retail spending. Janus was the Roman god of doorways and has two faces, one looking at the past and one eyeing the future.

Indeed, while Walmart’s earning calls was a triumph, Target’s (NYSE: TGT) figures were, in the words of CNBC’s Melissa Repko, “its biggest earnings miss in two years.”

The iShares U.S. Consumer Discretionary ETF (NYSEARCA: IYC) is an exchange-traded fund (ETF) which tracks a market-cap-weighted index of American companies that provide consumer services.

IYC tracks an index of U.S. companies in the consumer discretionary industry, focusing on companies that are the most affected by the business cycle and seasonal consumer spending. This includes those that manufacture household durable goods, apparel and electronics, as well as those that offer services. IYC’s managers use market capitalization to select and weight the stocks in the portfolio, and each stock is capped at 15%.

Top holdings in this fund include Amazon.com, Inc. (NASDAQ: AMZN), Tesla, Inc. (NASDAQ: TSLA), Netflix, Inc. (NASDAQ: NFLX), Costco Wholesale Corp. (NASDAQ: COST), Home Depot, Inc. (NYSE: HD), Walmart’s (NYSE: WMT), McDonald’s Corporation (NASDAQ: MCD) and Walt Disney Company (NYSE: DIS).

As of Nov. 19, IYC has been up 6.44% over the past month and up 14.11% for the past three months. It is currently up 24.93% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $1.02 billion in assets under management and has an expense ratio of 0.39%.

While IYC allows a prospective investor entry into the world of consumer discretionary stocks, such a fund may not be suitable for all portfolios. So, it’s important to carefully consider the risks and potential returns before making any investment decisions.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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In case you missed it…

Riding the Trump Tailwind

Last week, I spoke at the EconoSummit in Las Vegas. I was there with my Eagle colleague and Fast Money Alert co-editor Dr. Mark Skousen, as we shared our thoughts with the attendees about the markets in a post-election, Trump/Republican dominated new world order.

Both Mark and I agreed that the new government is going to be much better for financial markets and the economy at large, and the chief reason is because of the impending deregulation wave and the likelihood that the current Trump tax cuts, which are set to expire soon, will be extended and become permanent.

And given the complete control of both chambers of Congress, Republicans will have an opportunity to prove to America that they mean business on the tax issue. So, ladies and gentlemen of the House and Senate, please act accordingly.

Both Mark and I also agree that the idea of imposing across-the-board tariffs of the kind President-elect Trump has flirted with is a bad idea, but hey, we can cross the tariff bridge when we come to it.

The most interesting question here for us, as investors, is how do we best ride the Trump tailwind.

As I told you in a previous issue, my biggest election winner here is cryptocurrencies.

President-elect Trump is very pro-cryptocurrency, and he embraced the asset class while he heavily courted the crypto community vote. In my view, this was a great decision because crypto is an unstoppable force driven by demand and technology that cannot be denied or ignored.

Now, judging by the market’s reaction to the Trump win, I think my thesis has proven spot on.

Chart courtesy of www.stockcharts.com.

Last Wednesday, Bitcoin hit an all-time intraday high of nearly $94,000!

The move higher in Bitcoin, which is up some 20%+ since Election Day, has really vaulted our portfolio holdings in my new advisory service, Jim Woods’ Crypto & Commodities Trader.

The service is off to a fantastic start, as we banked a 156% realized gain in the first six days!

Last Wednesday morning, subscribers to the Crypto & Commodities Trader were treated to two more big winners. This time, we didn’t have one, we had two triple-digit-percentage realized gains!

The first, a 200% win, came via call options in a company that specializes in Bitcoin mining. The second, a win of 221%, came via call options in a company that operates a cryptocurrency trading platform for individual investors.

Note here that while both of these companies are in the cryptocurrency space, neither is actual Bitcoin or other cryptocurrencies. Instead, these are “picks-and-shovels” companies that facilitate the crypto space, companies with real earnings, real revenue and real call options that move ultra-fast.

By knowing which companies, and which options, are most likely to deliver outsized gains for investors, we’ve been able to bank gains of 156%, 200% and 221% in our first three completed trades!

Do you want these kinds of gains in your portfolio?

I know the answer is “yes,” because as you read this, I know you are nodding your head along with me.

So, I implore you not to wait a minute longer. Learn how you can get the expert guidance you need to navigate the crypto and commodity space, and how you can put yourself on the path to riding the biggest Trump tailwind in this market, right now.

To do so, all you need to do is check out my new advisory service, Jim Woods’ Crypto & Commodities Trader, right now.

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Wooden Wisdom

“Whatever you do in life, surround yourself with smart people who’ll argue with you.”

–Coach John Wooden

A very good friend just sent me some quotes from the great John Wooden. When I was an undergraduate at UCLA, Wooden’s presence was unmistakable, with tributes to the famed basketball coach all over campus. In this quote, he reminds us that we should always have people around us that lift us up, that challenge our thinking and that aren’t afraid to tell us when we mess up. This is the opposite of having “yes men” and “loyalists” surrounding us. If you want to be better, surround yourself with truthtellers.

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

In the name of the best within us,

Jim Woods