Defense stocks are among the best trades since Trump’s election — here are the other winners and losers

F-35 aircraft aboard the USS America, an amphibious assault ship for the Navy.
Andy Wolfe | US Navy
F-35 aircraft aboard the USS America, an amphibious assault ship for the Navy.

It's been exactly one year since President Donald Trump was elected and investors in defense stocks have benefited greatly.

The aerospace and defense industry has risen more than 40 percent since Nov. 8, 2016. The only two industries that have outperformed defense are computers and peripherals and semiconductors.

Of the 11 stocks in the defense industry, 10 are up at least 15 percent. But the biggest advancer in the space has been Boeing, which is up 87 percent since the election.

Overall, the aerospace and defense sector has benefited from dealmaking activity and increasing geopolitical tensions, especially between the U.S. and North Korea. In September, the isolated Asian nation successfully tested a hydrogen bomb that can be mounted onto an intercontinental ballistic missile.

The chart below shows the 10 best- and worst-performing industries since the election. (Industry gains and losses through Monday, Nov 6, 2017).

The overall U.S. stock market has also surged since the election. The S&P 500 is up 21 percent since Election Day 2016, while the Dow Jones industrial average and the Nasdaq composite have jumped 28 percent and 30 percent, respectively.

Other stalwarts since the election include the technology and financial sectors, which are up 39 percent and 33.5 percent, respectively, in that time period.

Tech has been lifted by two key factors: Strong earnings and the prospects for a lower repatriation tax for overseas profits. Last week, the House unveiled a corporate tax plan that calls for a one-time tax rate of 12 percent on cash returns and 5 percent on noncash for corporate money repatriated from overseas.

If the bill turns into law, it would greatly benefit tech giants like Apple and Microsoft, which have billions of dollars stashed outside the U.S.

Financials, meanwhile, have benefited from the possibility of deregulating the sector. Deregulation was a big part of Trump's campaign platform. Also, he nominated Jerome Powell to become the next Federal Reserve chairman, someone who is in favor of reviewing regulatory changes.

But not everyone has participated in this yearlong rally. The three worst-performing sectors since the election are consumer staples, energy and telecommunication services. Staples and energy are up marginally, while telecommunications has lost nearly 10 percent.

Staples and telecommunications are two sectors highly sensitive to higher interest rates. The Fed has lifted the overnight rate twice this year and is expected to hike once more in December.

Investors in the energy space, meanwhile, have been cautious to reinvest in those stocks given the volatility seen in oil prices throughout 2016.

As for individual stocks, the three biggest gainers since the election are in tech: Nvidia, Align Technology and Micron Technology. In fact, five of the 10 biggest advancers in the S&P 500 since Election Day are tech stocks.

Most of the biggest decliners, meanwhile, are retail stocks, including: Macy's, Foot Locker and Under Armour. Retailers are still trying to figure out how to adapt to changing consumer tastes and evolving shopping methods, among other factors.

The chart below shows the 10 best- and worst-performing stocks since the election. (Sector and industry gains and losses through Monday, Nov 6, 2017).

This has been a stellar ride higher for the U.S. stock market and some investors are wondering if the rise can go on.

Sam Stovall, chief investment strategist at CFRA Research, in a note Monday said stocks still have room to run.

"History suggests longer than we would expect. On average, the S&P 500 continued sailing along for another year after the conclusion of a president's first year since being elected before slipping into a new decline of 10% or more," Stovall said.


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