Trump Trick & Tweets: These ETFs May Prosper Ahead

February 24, 2017

Value Over Growth

All three of the key changes noted above should boost value stocks relative to growth stocks. Rising consumption broadens sales growth, infrastructure projects increase demand for physical goods, and a more favorable regulatory environment benefits energy and materials stocks. All of those trends should boost interest rates and loan demand, supporting financials as well. 

 

 

Prior to 2016, value had lagged growth in six of the previous nine years, and had never outperformed by more than 2.3%. In the six years growth outperformed, three of them (2007, 2009 and 2015) did so by 9.5% or more.

Cumulatively, growth outpaced value by more than 50% from 2007 to 2015. Last year, value picked up more than 10% on growth in the U.S. (see chart above). While value did well last year, we expect the trend to continue to favor value stocks over the intermediate term. Two ETFs that offer exposure to this trend are:

Diversify Creatively

While this economic recovery has been very long by historical standards, it has also been slow. Only in recent periods have we seen wage pressures starting to break through after a long wintry economic recovery.

Global supply chains have helped keep wages low by allowing firms to transfer production to cheaper areas. The new nationalists will pressure companies to keep more production in the home country. That in turn will push up prices, inflation and interest rates.

 

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