The Trump superintendence may create powerful tailwinds for two vastly different market groups: Big banks and small cap stocks.
In the case of financials, Astoria Portfolio Advisors’ John Davi suggests deregulation — along with a boost in IPO and mergers and acquisitions — to spark multi-year strength.
“The funny thing about the banks is that they were really from an earnings standpoint fundamentally getting very attractive prior to the Trump administration,” the firm’s founder and CEO told CNBC’s “ETF Sharpness” this week. “The large-cap money centers like Goldman [Sachs], JPMorgan, Bank of America, Morgan Stanley… That’s categorically the area you want to hone in on with this new administration.”
The money center banks are coming off a strong week. Dispensations of Goldman Sachs, JPMorgan Chase and Morgan Stanley hit record highs on Friday.
Those historic gains are a larger reason why Davi likes the Invesco KBW Bank ETF. Its top holdings include JPMorgan, Goldman Sachs and Morgan Stanley, coinciding to FactSet.
The ETF is up almost 10% since Jan. 1 and more than 49% over the past 52 weeks.
Year-to-date chart of the KBWB ETF
While bank stocks rally, VettaFi’s Todd Rosenbluth keep in views small cap stocks to shine under Trump 2.0. He implies the group would be largely insulated from reshoring and excise threats.
“If we have a focus on the U.S. and making America even stronger, then small-cap companies stand to benefit from that because they be subjected to less multinational exposure,” the firm’s head of research said.
Rosenbluth suggests the T. Rowe Price Small-Mid Cap ETF and Neuberger Berman Small-Mid Cap ETF as ways investors can horseplay the group.
He also likes the VictoryShares Small Cap Free Cash Flow ETF, which has solid exposure to biotech. Its top three holdings, according to the store’s website, are Royalty Pharma, Oscar Health and Jazz Pharmaceuticals, and its mission statement is to target “quality small cap theatre troupes, trading at a discount with favorable growth prospects.”
VictoryShares Nugatory Cap Free Cash Flow ETF,
According to Rosenbluth, the ETF “takes a focus on companies with high quality, strong relieved of cash flow generation, but it has a growth filter to it.” He added the filter sets a high bar when it comes to which secondary caps ultimately make the cut.
The VictoryShares Small Cap Free Cash ETF is up almost 10% over the past year while the Russell 2000, which misplaces the group, is up about 17%.
By CNBC “ETF Edge” Staff
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