The first 100 days of President Donald J. Trump's term are on track to work out pretty well for stocks. That's better than modern White House history would suggest.
Stocks have not done that well at the outset of new presidential terms. When the market has done well, it's been more often for the Democrats. So while the Trump presidency has produced some big missteps — and disappointments for Trump supporters — barring a major meltdown in the next two weeks, the first 100 days are on track for sizable gains for the market.
Even after posting negative returns in the past month, the primary S&P 500 ETF (SPY) is up 2.9 percent since Jan. 20, and the primary Dow Jones Industrial Average ETF (DIA) is up by 3.6 percent, according to Morningstar. The primary Nasdaq 100 ETF (QQQ), meanwhile, has been the best, with a return of 6 percent.
The 45th U.S. president still has his work cut out for him if he wants to match a nemesis: The S&P 500 posted positive performance during the first 100 days of both of President Barack Obama's terms in office. Going back as far as the Eisenhower years, Democratic administrations have had much stronger stock markets at the beginning of new terms, according to CFRA data.
The data on presidents and markets is clearly not statistically significant — it's about as small as a sample gets. And the torrid pace set by stocks directly after Trump's win on Nov. 8 complicated market pricing efforts. So the first 100 days' data is probably best considered as something between a sound bite and data point in the final analysis. But it's worth reviewing what has been expected and what has been surprising about the direction in the stock market during Trump's first 100 days, especially at the sector level.
Energy had outshone nearly every sector during the early days of the past five presidential administrations. And when presidents are more energy-centric than others, it has helped. Not in Trump's case. While energy stocks rose 11.4 percent in the first 14 weeks of President Bush's new administration in 2001, and 11.3 percent in 2005, the Energy Select Sector SPDR (XLE) is down more than 6 percent since Jan. 20.
Trump's administration still looks to be positive for energy — especially traditional sources, including oil and gas. But oil prices — after a big recovery in 2016 — have been the culprit in a falloff for the sector. For investors who think the sector is attractive, CFRA recommends XLE as the broadest way to catch any energy gains. It invests more than 46 percent of assets in what Morningstar classifies as "giant" stocks, including global oil players like Exxon Mobil and Chevron. The fund is low-cost and highly liquid.
"If you are a believer in patterns based on past performance, then diversified sector ETFs are a good way to get exposure," said Todd Rosenbluth, director of ETF and mutual fund research at CFRA. Vanguard Energy (VDE) is another broad energy ETF featuring the same top three oil stocks, but assets are also diversified among exploration companies.
Given that Trump wants to drill for more oil, the iShares U.S. Oil and Gas Exploration and Production ETF (IEO) could still be a beneficiary of the new administration. It includes more U.S.-focused drillers, like ConocoPhillips and EOG Resources, as well as refining plays like Phillips 66.
Neena Mishra, director of ETF research at Zacks Investment Research, said the SPDR S&P Oil and Gas Exploration & Production ETF (XOP) is similar to IEO, with a mix between exploration stocks and refining stocks that is about 75 percent to 80 percent/15 percent to 20 percent, but it has lots of smaller-cap stocks, so it's more volatile. XOP has near-30 percent of its holdings in small-cap names, while for IOE the percentage of exposure to small-cap stocks is under 10 percent.
The price-to-earnings ratio of IEO is 17.43; for XOP the P/E ratio is 25. Five of XOP's top 10 holdings have a market cap of roughly $5 billion or below, including Chesapeake Energy, currently its largest holding. None of IEO's top 10 holding have a market cap less than roughly $19 billion.
The materials sector — which includes chemicals, paper and mining — has been another of the more consistent sector winners in recent history of new administrations. Materials stocks were strong performers in 2016, too. Rosenbluth pointed to the broad materials ETF that represents the S&P 500 materials subsector, the Materials Select Sector SPDR Fund (XLB). Its main holdings include high-profile merger targets Dow Chemical, DuPont and Monsanto. "Company consolidation is taking place and driving prices higher," he said.
And it has done OK, though the sector has trailed the broader market, up close to 1.3 percent since Jan. 20, according to Morningstar.
The smaller, SPDR S&P Metals and Mining ETF (XME) mainly owns steel companies, like U.S. Steel, ripped after Trump's election, but since he actually assumed office, it has declined by near-9 percent. U.S. Steel is down 13 percent since Jan. 20 — though its near-50 percent gain in the past year still looks good.
"It could be a beneficiary of increased steel demand from U.S. companies," Rosenbluth said.
Mishra also likes the smaller, Van Eck Vectors Steel (SLX), which has international holdings like Rio Tinto. "Trump is talking about building infrastructure," she said, "so materials companies will do well." It is also down more than 9 percent since Jan. 20.
Technology has historically lagged other sectors at the beginning of new term — with Obama's first term as an exception. Many pundits expected tech to trail under Trump as a global manufacturing and trade war rattled supply chains. That hasn't happened — Trump has even toned down talk about NAFTA revisions and did not follow through on campaign rhetoric calling China a currency manipulator.
Trump did make overtures to tech CEOs under the guidance of his Silicon Valley backer, venture capitalist Peter Thiel. Technology stocks would also benefit if corporate profits held offshore, were allowed to be brought back to the U.S. on a preferential tax basis. Many big technology companies are big dividend payers. That would help explain tech stocks being up so much since Jan. 20, though there are indications tax reform will take longer than initially expected.
The Vanguard Information Technology (VGT) has generated a return of more than 6 percent since Trump took office, according to Morningstar. Its biggest holdings include stocks like Apple and Microsoft, which are among the tech companies that have had rising dividend payouts.
Market analysts were more positive on health care after Trump's win because Hillary Clinton had been more vocal about drug pricing. While Trump made plenty of comments about drug costs and at his first press conference in six months, on Jan. 11, the then-president-elect even said drug companies have been getting away with murder, investors haven't been fazed.
As for Obamacare and the health sector, also lots of talk and a major Trump failure, but little negative effect on stocks. The Health Care SPDR (XLV) is also up near 6 percent since Jan. 20.
Keith Lerner, chief market strategist for SunTrust, said health care will continue to be faced with headline risk that can result in price swings for the sector, but he pointed out that health care was the worst performing sector in 2016. He thinks any additional headline risks will create opportunities to buy on the dip. He is also favoring large-cap biotech, which came into Trump's term trading at its largest discount to the broad-based market — on a price-to-earnings basis — in the past 20 years.
— By Constance Gustke, special to CNBC.com