Good morning, tradersโฆ
Jeff here.
When major catalysts cause shifts in market conditions, certain โtradesโ emergeโฆ
But Iโm not talking about individual stock trades โ Iโm referring to larger trends involving a specific basket of stocks and sectors.
For example, in 2020, when COVID-19 hit and everyone started quarantining โฆ work-from-home stocks (such as Zoom, Peloton, and Docusign) went absolutely ballistic. โThe Pandemic Tradeโ became a legitimate phenomenon in the stock market.
Similarly, in 2021, when GameStop Corp. (NYSE: GME) booked its historic, 800%+ short squeeze โฆ any stock with high short interest (such as AMC and Blackberry) started squeezing to the moon. โThe Meme Stock Tradeโ was the dominant theme of 2021.
And now, a brand-new โtradeโ is emergingโฆ
Since Election Day, weโve seen some parabolic moves in specific sectors โ what Iโm calling โThe Trump Trade.โ
What exactly is driving these swings? And more importantly, will these moves continue into 2025?
Before we get to the names Iโm watching, I want to make one thing crystal clear: weโre not here to make political statements. As traders, we have one goal and one goal only โ to make as much money as possible.
Whether you agree or disagree with Trumpโs policies, the reality is that his return to The White House is set to shake things up in a big way.
And for options traders, that equals an enormous opportunity.
With that in mind, letโs look at the stocks and sectors primed for the biggest moves under a second Trump administrationโฆ
The Long Side of โThe Trump Tradeโ
Crypto Stocks
Crypto stocks have been going haywire since the election because Trump has vowed to be the most pro-crypto President weโve ever had.
Heโs promised to:
- Fire crypto boogeyman (and SEC Chairman) Gary Gensler โon day oneโ…
- Create a strategic national crypto stockpileโฆ
- Mine all Bitcoin in the United Statesโฆ
- Lower interest rates furtherโฆ
These moves could be massive for the entire crypto landscape โ I think they could send Bitcoin to $100,000+ in relatively short order.
But an even more interesting setup is forming in the backgroundโฆ
While Bitcoin is currently in full-on price discovery mode at fresh all-time highs, crypto stocks havenโt even touched their 2021 peaks, which shows how much catch-up potential there is.
If Trump follows through on his crypto promises, I see a lot of upside for these namesโฆ
Stocks to Watch
- Marathon Digital Holdings Inc. (NASDAQ: MARA)
- Coinbase Global Inc. (NYSE: COIN)
- Riot Platforms Inc. (NASDAQ: RIOT)
- ProShares Bitcoin ETF (NYSEARCA: BITO)
Banks and Fintech Stocks
Trump has always supported the cutting down of red tape.
With Trump-driven deregulation, banks and fintech companies can operate with fewer restrictions, which could translate to bigger profits โ and higher share prices.
Just look at the price action โ weโre already seeing some serious post-election juice in banking stocks as the market anticipates these changes.
Stocks to Watch
- Block Inc. (NYSE: SQ)
- SoFi Technologies Inc. (NASDAQ: SOFI)
- Bank of America Corp. (NYSE: BAC)
- Financial Select Sector SPDR Fund (NYSEARCA: XLF)
- JPMorgan Chase & Co. (NYSE: JPM)
Cannabis Stocks
Former Governor of New Jersey Chris Christie, one of Trumpโs close allies, recently predicted that Trump could federally declassify cannabis, effectively making it legal nationwide.
Trump hasnโt said this himself, but if this idea gains traction, the upside in cannabis stocks could be parabolic.
These stocks have been heavily beaten down for years, so any move toward federal de-scheduling could spark a violent rally to the upside.
Stocks to Watch
- AdvisorShares Pure US Cannabis ETF (NYSEARCA: MSOS)
- Canopy Growth Corp. (NASDAQ: CGC)
- Curaleaf Holdings Inc. (OTC: CURLF)
- Cronos Group Inc. (NASDAQ: CRON)
- Turning Point Brands Inc. (NYSE: TPB)
Small Business Stocks
Small businesses have lagged behind the NASDAQ for years, but now theyโre playing catch-up in a big way.
Trump is almost certain to help small businesses, so I think you have to be a bull on this sector for the foreseeable futureโฆ
Stocks to Watch
- iShares Russell 2000 ETF (NYSEARCA: IWM)
The Short Side of โThe Trump Tradeโ
Gold Stocks
Gold and its related stocks โ which have been absolutely blasting off during the Biden administration โ might be in for some serious downside with Trump back in charge.
Gold has been surging because weโve been in a highly inflationary environment, and market participants have been looking for ways to hedge against a devaluing U.S. dollar.
But with Trump appointing Elon Musk and Vivek Ramaswamy as co-chairs of a brand-new Department of Government Efficiency (DOGE), thereโs a serious push to cut government spending and bring down inflation.
Elon has said he wants to cut $2 trillion of the federal governmentโs $6 trillion budget.
Less government spending means less need for inflation hedges like gold, which has already been sliding off its highs.
And I think thereโs more red to comeโฆ
Stocks to Watch
- SPDR Gold Trust (NYSEARCA: GLD)
- VanEck Gold Miners ETF (NYSEARCA: GDX)
Solar and Green Energy Stocks
This oneโs pretty straightforward: Trump has never been big on green energy and favors fossil fuels.
If Trump cuts government subsidies for solar and other renewables, it could weigh heavily on these stocks.
Bidenโs policies have given green energy stocks a lot of support, but with Trump at the helm, that backing will likely disappear faster than Gary Gensler.
Stocks to Watch
- Sunrun Inc. (NASDAQ: RUN)
- Invesco Solar ETF (NYSEARCA: TAN)
- First Solar Inc. (NASDAQ: FSLR)
- Brookfield Renewable Partners LP (NYSE: BEP)
Chinese Stocks
Trumpโs stance on China is as tough as ever, and I donโt see that softening anytime soon.
During his last term, a full-scale trade war hammered Chinese stocks, and this time could be similar.
Even if it doesnโt go as far as a trade war, Trumpโs policies will probably create a tough environment for these companies.
Stocks to Watch
- Nio Inc. (NYSE: NIO)
- Alibaba Group Holding Ltd. (NYSE: BABA)
- JD.com Inc. (NASDAQ: JD)
- Bilibili Inc. (NASDAQ: BILI)
- PDD Holdings Inc. (NASDAQ: PDD)
Defense Stocks
This idea is more speculative and may take longer to materialize, but hear me outโฆ
Trump has suggested he will end both of the foreign wars weโre currently involved in.
If that happens, we could see cuts to defense spending, which could weigh on stocks in this sector.
These stocks typically perform well with high government budgets. But with the new Department of Government Efficiency cutting costs โ and a potential policy a shift away from big military operations โ I think defense stocks will come well off their highs.
Stocks to Watch
- Rtx Corp. (NYSE: RTX)
- Lockheed Martin Corp. (NYSE: LMT)
- L3Harris Technologies Inc. (NYSE: LHX)
- Northrop Grumman Corp (NYSE: NOC)
There you have it, folks. These are the names I expect to see the biggest moves in over the next few months (and even the next four years).
But remember, there are no guarantees in the market. Donโt chase these setups without doing your own due diligence.
Happy trading,
Jeff Zananiri
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*Past performance does not indicate future results
