New Opportunity Emerges After Trump Trade Cools

To say the financial markets are undergoing a fit would be an understatement.

As you know, stocks soared in the three months that followed Donald Trump’s surprise victory.

And the rally was led by stocks that had previously been laggards: financials, industrials and materials.

Yet the epic failure of the Trump administration to repeal and replace Obamacare looms large in the minds of investors.

In particular, they’re doubting the president’s ability to advance his agenda through a bitterly divided Congress. As a result, all three sectors that led the markets after the election have seen notable declines recently.

But a new opportunity has just emerged…

In fact, the stock market’s sleepiest sector just transformed into a red-hot momentum trade as investors flock to “safety.”

And as senior analyst Jonathan Rodriguez writes below, one tiny firm is leading the safety trade rally…

Ahead of the tape,

Louis Basenese
Chief Investment Strategist

Sleepy Small Cap About to Ignite

There’s no question that a major driver of the latest leg up for the stock market is President Trump.

His campaign promises — like deregulating the banking and energy sectors, boosting infrastructure spending and renegotiating trade deals — had investors salivating in late 2016.

Yet save for a flurry of executive orders and a hard-fought confirmation of a Supreme Court justice, he hasn’t been able to do much.

And the shine of the Trump trade has faded fast.

This is no more evident than in the realm of small-cap stocks. These equities tend to rise with increased investor confidence, and fall as it wanes.

The Russell 2000, which rallied as much as 18% after the election and gained twice as much as the S&P 500, has declined just over 1% in the last month.

But while the so-called “risk-on” trade is fading, an equally profitable “risk off” has emerged.