Welcome to the first day of March, or the day after the first de facto State of the Union address by President Trump.
As I write this, the market is up about 320 Dow points, or 1.5%. I guess we know the answer to the question a lot of people were wondering about last night, and that is how the market would react to the Trump address.
If you’ve been a regular reader of this publication, and/or if you’ve been a subscriber to my Successful ETF Investing advisory service, then you know I’ve been telling you that the only thing that really matters to this market right now is President Trump’s pro-growth agenda.
Markets will trade “Trump on” when that agenda looks more like it could become reality. That means stocks will go up, the dollar will go up and bond yields will go up.
Conversely, when it looks like the Trump agenda is facing opposition, or when there appears to be discord among Republicans in Congress over the path to implement the pro-growth economic policies, then markets will trade “Trump off.”
That means the rally will stall, the dollar will slide and bond yields will fall. This Trump-off trade largely has been the case for the past couple of weeks or so, although stocks have managed to grind modestly higher.
Today, however, it is all about the Trump-on trade. And if you are nearly fully invested in this market, as we are in the Successful ETF Investing advisory service, then you are riding this Trump-on market higher.
You might say that being “all-in” this market is a case of the old Wall Street adage, “The trend is your friend.” The even older adage is, “Don’t fight the tape,” but these days not many people even know what a “tape” is (yes, I remember; and yes, I’m old school like that).
Perhaps more importantly, last night’s address by President Trump gave the markets a sense of confidence in Mr. Trump’s ability to tone down the decisive and dark rhetoric he displayed in his inaugural address. Instead, the president opted for a more optimistic, can-do tone coupled with that aforementioned pro-growth agenda.
It is this approach to problem solving that Wall Street suspects will mobilize enough Republicans in Congress to pass pro-growth legislation in harmony with the president’s plans.
And, as I’ve told you for some time, this is what the smart money on Wall Street wants more than anything else.
After last night, it looks increasingly like that’s what Wall Street will get.
If you want to find out how best to put your money to work for the Trump-on trade, then I invite you to check out Successful ETF Investing today!
ETF Talk: How to Invest in Concentrated Regional Banks
By Eagle Staff
The iShares U.S. Regional Banks ETF (IAT) is a market-cap-weighted exchange-traded fund (ETF) focused on the financial sector that is an investment worth considering for those who want exposure to regional bank stocks.
This fund tracks the performance of an index of small- and mid-cap regional banks and excludes mega-caps such as J.P. Morgan and Wells Fargo. Barclays Global Fund Advisors serves as the adviser of the fund, which has amassed total assets of $749.6 million that are invested in more than 60 individual regional banks.
As a result, IAT casts a reasonably wide net in terms of quantity of investments. However, most of the fund’s assets are concentrated in its top holdings. For that reason, the performance of a couple of stocks may have a strong impact on the fund’s overall return.
The fund pays a quarterly distribution, boasting a distribution yield of 1.45%. The ETF charges an expense ratio of 0.44%. This expense ratio is fair compared to other, similar funds.
From the chart below, you can see that IAT started off the year slowly, but has rallied to new highs following the Nov. 8 election. Expectations for the Fed’s interest hikes later this year are beneficial to regional banks and IAT, as well.
IAT has a year-to-date return of 4.76% and a one-year return on 60.70%, handily beating the S&P 500’s 1.90% and 13.18%, respectively. As of the end February 2017, IAT’s price had increased by more than 35% during the last four months.
Unlike many of its peers. IAT is a significantly concentrated fund. Roughly one third of the fund’s assets are invested in its top three holdings. Its top five holdings are U.S. Bancorp (USB), 15.90%; PNC Financial Services Group Inc. (PNC), 11.19%; BB&T Corporation (BBT), 7.07%; SunTrust Banks Inc. (STI), 5.27%; and M&T Bank Corporation (MTB), 4.73%.
If you are looking for a concentrated play on regional banks, consider iShares U.S. Regional Banks ETF (IAT) to add to your portfolio.
As always, we are 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.
Even Leftists are Embracing the Trump Trade
Haters are gonna hate, as the kids these days say. But the smart haters are going to hate while also making money.
That’s precisely what leftist icon, and billionaire manipulator of markets, George Soros, has decided to do.
The big money behind so much liberal activism is no fan of President Donald Trump, but when it comes to making money, Soros is a fan of results.
So, when I read Soros’ recent 13F Securities and Exchange Commission filing, which discloses holdings required of institutional investment managers with more than $100 million, it didn’t surprise me that Mr. Soros had embraced the Trump-on trade.
The record shows that in Q4 2016, Soros Fund Management took a $14.9 million stake in investment bank Goldman Sachs (GS). Yet GS wasn’t the only financial holding Soros embraced.
Soros also bought some $3.1 million shares of the Financial Select Sector SPDR (XLF).
Given the fact that since Election Day, XLF has surged some 22.6%, it’s no wonder a shrewd investor such as Soros would swallow his political pride and embrace the “Trump-On” trade in markets that I’ve been telling you about for weeks.
The moral of the story here is though you may love or hate a certain fact of reality, your money doesn’t care.
Your money, and your investing decisions, should always be objective.
That means that regardless of how you feel about a given fact of reality — especially about a particular politician in office, or a particular policy, or a particular law — if there is an investable angle associated with that fact, it needs to be evaluated for possible inclusion in your portfolio.
In broader, philosophic terms, this is consistent with the axiom I live by called the “primacy of existence.” All this really means is that you see the world for what it is, i.e. facts are facts, independent of how we might want them to be.
Right now, the market is trading Trump on. That’s a fact of reality that investors fail to acknowledge at their own financial peril… and even haters like George Soros know that.
Free Trade Is Fair Trade
“The philosophy of protectionism is a philosophy of war.”
— Ludwig von Mises
Perhaps the greatest economist ever, Mises knew that protectionism and trade wars are not only harmful for countries, they also can lead to actual shooting wars. And as much as I am in favor of the pro-growth Trump economic agenda, the protectionism and trade war rhetoric in his speech last night troubles me. Free trade is fair trade, and the issue shouldn’t be looked at in terms of free trade or fair trade, as the president said last night.
Wisdom about money, investing and life can be found anywhere. If you have a good quote 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 audio podcast, newsletters, seminars or anything else. Click here to ask Jim.
In case you missed it, I encourage you to read my column from last week about a massive financial sector fund.