5 ways to play the stock market under President Trump

A lot has changed since Election Day. And while the rise of President Donald Trump has been both praised as movement and maligned as a harbinger of fascism, the reality is that the jury is still out on just what the next four years will look like.

One thing that’s not an open question, however, is Wall Street’s receptiveness to the incoming president—and, perhaps more importantly, a Republican majority in both houses of Congress. The Dow Jones Industrial Average is up nearly 10 percent since Nov. 8, 2016, and recently eclipsed the 20,000 mark for the first time in history.

{mosads}But as the old saying goes, it is not really a stock market but a market of stocks. Individual constituents of the Dow Jones have performed dramatically different in the last three months or so. For instance, financial giant JPMorgan Chase (JPM) is up 24 percent since Election Day, while retail king Walmart (WMT) has actually fallen by almost 6 percent in the same period.

So what trading moves can investors make under President Trump now that his campaign is over and the hard work of managing the nation begins?

Buy Wall Street banks

As part of the Dodd-Frank Act, the Volcker rule restricts speculative trading at banks. However, with control of key agencies like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), Trump doesn’t need to legislative approval to ease enforcement efforts. That means bold banks with a history of trading success could do very well. For instance, Goldman Sachs just posted big profits thanks in large part to its trading division. If Congress helps to loosen other elements of Dodd-Frank, as many bank executives have advocated, it could create an even bigger opportunity for banks in 2017 as regulations become less burdensome.

Sell global multinationals

While Trump’s policies are easy on banks, they are quite harsh on multinational corporations that rely heavily on overseas revenue streams. For instance, General Motors (GM) reported that in the third quarter of 2016, it sold that it sold nearly 6.5 million vehicles in China, compared with just under 5.6 million cars across all of North America. No amount of photo opportunities with Trump or pledges for investment in the U.S. is going to change the dynamics of GM’s international business or mitigate a trade war with China, so investors should steer clear of stocks like these.

Hold on to your bonds

When interest rates rise, the principal value of bond investments falls. And in the immediate aftermath of Trump’s election, we saw deep declines for bond values as rates on 10-year U.S. Treasury notes soared from a low of under 1.8 percent in October to more 2.6 percent by mid-December after the Federal Reserve raised key interest rates. However, with central banks in Japan and Europe still holding rates in negative territory, and most Fed policymakers circumspect about future rates, it appears most of the fireworks is behind us in the bond market. That doesn’t necessarily mean things are looking up, but it also doesn’t mean investors should fret another big move down.

Hedge your bets with gold

It’s an oversimplification, but gold prices rise in times of economic uncertainty, which pretty much sums up the situation in the eyes of many investors. The precious metal can be volatile, yes, but a rise of 6 percent in the last month even as the stock market’s rally had stalled seems to hint that gold is moving in the right direction. With tough talk about trade, a challenging balancing act between big U.S. deficits, and big hopes for spending on things like tax cuts and infrastructure, it may be wise to have gold as a fallback if things don’t work out as Republicans hope.

Simply stay the course

Take all of this with a grain of salt, of course, since even the most well-intentioned trades go sour and history shows a diversified long-term perspective almost always beats an “active” strategy and tactical trading. In 2016, a mere 33 percent of active managers beat their “passive” benchmark, such as the fixed list of 500 large corporations that comprise the S&P 500 index.

Furthermore, active funds lost more client assets in 2016 than they did even during the 2008 meltdown. In other words, your best investment under Trump may be simply to hold a diversified S&P 500 index fund until his term is up.

Jeff Reeves is a stock analyst and executive editor of InvestorPlace.com. His commentary has also appeared on CNBC, Fox Business, USA Today, and the Wall Street Journal network.

The views of contributors are their own and are not the views of The Hill.