Investing in the age of Trump
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Donald TrumpDonald John TrumpMark Kelly clinches Democratic Senate nod in Arizona Trump camp considering White House South Lawn for convention speech: reports Longtime Rep. Lacy Clay defeated in Missouri Democratic primary MORE’s presidency has so far has been full of surprises. Whether it be the revival of the Keystone Pipeline, the war waged on the Affordable Care Act or his plan to dismantle the Dodd-Frank Act, investors are left guessing as to what the businessman-turned-president will do next.

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Investing in the financial markets under the Trump administration is not for the faint of heart. As his presidency continues to produce bombshells on almost a daily basis, the markets will subsequently respond with heightened volatility, leaving investors to pick up the pieces. Every unforeseen executive order signed by Trump will continue to solidify this high-risk, high-reward environment.

However, some areas of the market are poised for outperformance or underperformance, depending on which side of Trump’s policies they fall.

Financials

On Feb. 3, Trump announced his intentions to undo the Dodd-Frank Act and halt the implementation of the Department of Labor’s fiduciary rule, a law intended to force financial advisors to act in their clients’ best interests.

The Dodd-Frank Act has imposed billions of dollars of extra regulatory costs on banks, and the fiduciary rule has also been met with resistance from many in the financial advice business because of the extra anticipated compliance expenses. As more news surrounding the deregulation of this industry continues to trickle out, Wall Street banks and other firms operating in financial services will continue to benefit.

Defense

Some estimate Trump’s plans to beef up the military by way of 90,000 additional Army soldiers, a 350-ship Navy and stronger missile and nuclear defenses will increase total military spend by between $500 billion and $1 trillion. This clearly bodes well for contractors in the defense and aerospace sectors.

Pharmaceuticals

Companies involved in the manufacturing and distribution of pharmaceutical drugs have been another target of Trump’s rhetoric since Election Day. Trump wants to eliminate the 2.5 percent tax associated with ObamaCare, but also wishes to keep the two most popular, yet expensive, provisions under the law: allowing children under the age of 26 to remain on their parents’ health care plans and extending affordable coverage to those with pre-existing health conditions.

To keep healthcare affordable, Trump hopes to pressure the pharmaceutical companies into lowering their prices, which will likely hurt their profit margins and share prices.

Hospitals

Another ripple from the likely repeal or disassembling of the Affordable Care Act extends to the hospitals themselves. Many hospitals recently spent tens of millions of dollars adjusting their operating systems to the new set of rules enacted by ObamaCare.

Now that the rules are once again being rewritten by the Trump administration, hospitals are forced to alter the way they operate once again in hopes of keeping up with the changing regulatory landscape. This will be another costly and time consuming endeavor.

Bonds

Before Trump’s victory in November, the U.S. economy was already headed into an environment of rising interest rates. Trump’s pro-growth proposals, including tax cuts, massive infrastructure expenditures, and heightened military spending, are intensifying this momentum. In an environment with below 5 percent unemployment, rising interest rates are going to place considerable pressure on the fixed income sector as a whole.

It’s always prudent to review your financial plan and investment strategy on a recurring basis, and that’s no different now. However, considering we are at near all-time highs in the stock markets, it might be a good time to take some profits off the table to use toward retirement or a large purchase.

Risk-averse investors be warned: dramatic change across the political realm has begun. Following closely behind will be greater market uncertainty and the risk of future losses.

Joseph P. Heider is founder and president of Cirrus Wealth Management. He is a registered securities principal, chartered financial consultant, and appears regularly on CNBC's Closing Bell and Fox Business News.


The views expressed by contributors are their own and are not the views of The Hill.