Predicting Market Movers: A Look at Stocks That Thrived After the 2016 Election and Their Potential Re-Run in 2024

With Donald Trump’s anticipated return to the White House in January 2025, investors are naturally curious about which sectors and individual stocks might experience a surge similar to the post-2016 election rally. Analyzing the top-performing S&P 500 stocks between November 7, 2016 (the day before the election) and the end of that year offers valuable insights and potential clues for the coming months. While past performance doesn’t guarantee future results, examining these trends can illuminate potential market movements based on anticipated policy shifts and investor sentiment.

Key Takeaways: Potential Market Winners in the Trump 2.0 Era

• Sectors poised for growth: Financials, energy (particularly oil and gas), and industrials are expected to benefit from deregulation and a potential focus on domestic manufacturing (“re-shoring”).
• High-beta stocks: These stocks, known for their volatility and potential for significant gains, are likely to experience a rally in a broadly positive market environment, further amplifying gains within specific sectors.
• Historical precedent: The performance of certain stocks following the 2016 election provides a useful, albeit imperfect, guide for anticipating potential future market movements. However, it’s crucial to remember that market dynamics are complex and influenced by multiple factors.
• Cautious optimism: While analysts generally hold positive views, the current valuations and potential for near-term corrections should be considered. Not all stocks from the 2016 winning list are guaranteed to repeat their performance.
• Diversification is key: Investors should approach any investment strategy with a diversified portfolio, mitigating risk and capitalizing on potential opportunities across different sectors.

The 2016 Election Winners: A Case Study

The period following the 2016 election saw significant gains in specific sectors, largely attributed to Trump’s policy proposals focusing on deregulation and domestic economic growth. Several companies emerged as stand-out performers, and a look at their performance provides a valuable context for potential market movements leading into the 2025 transition.

Financial Sector Gains

Bank stocks, for example, saw significant appreciation. Analyst **Ebrahim Poonawala** of Bank of America stated, **”We view the outcome of the U.S. elections … as positive for bank stocks,”** reflecting the expectation of reduced regulatory oversight and antitrust challenges under a Trump administration, a sentiment shared by many in the financial industry. Companies like KeyCorp experienced impressive growth; their stock ran up **more than 25%** between November 7, 2016 and the year’s end. However, it’s worth noting that KeyCorp analyst Keith Horowitz issued a downgrade to ‘neutral’ in 2024, citing a relatively full valuation despite strong year-to-date performance.

Energy Sector’s Complexities

The energy sector presents a more nuanced picture. While oil and gas companies like **Targa Resources** experienced significant gains (**up 116%** in 2024, excluding dividends), the impact on renewable energy was less positive. **Bob Brackett** of Bernstein noted **”extreme winners and losers,”** highlighting the sector’s uneven response to policy shifts. This uneven performance underscores the importance of individual company analysis, rather than simply relying on broad sector predictions. Even though Targa experienced significant growth, current analyst projections suggest a potential pullback in the coming year, emphasizing the inherent volatility of the market.

Industrial and Cyclical Stocks

Companies in the industrial sector and cyclical stocks like **CarMax (a used car dealer)** saw growth. The latter’s gains were linked to expectations of deregulation and the overall market rally associated with high-beta stocks. CarMax’s 25% increase between the 2016 election and the start of 2017 demonstrates the potential for such companies to benefit from a pro-growth policy environment. However, CarMax’s 2024 performance has been lackluster compared to overall market returns, a reminder that historical performance isn’t a guaranteed indicator of future results.

Analyst Perspectives and Cautions

While many analysts hold optimistic views regarding certain sectors following a potential Trump presidency, it is crucial to acknowledge the cautions expressed by some. The current valuations and potential for near-term corrections necessitate a balanced approach. **Andrew Kaplowitz** of Citigroup highlights potential winners, including companies with **”energy-related exposure and re-shoring,”** while indicating that companies previously viewed as beneficiaries of a “green-friendly” administration may face near-term pressure. He emphasizes however that **”favorable [long-term] underpinnings for these stocks should remain intact over time,”** highlighting the importance of considering long-term prospects in investment strategies.

Navigating the Market: A Balanced Approach

Investing based on political predictions inherently involves considerable uncertainty. While historical data can inform expectations, numerous other factors – economic conditions, global events, and unforeseen policy changes – significantly impact market movements. The substantial market rally following Wednesday’s election results, which drove the Dow more than 1,500 points, underscores this volatility.

The strong performance of companies like Targa Resources and KeyCorp in the period following the 2016 election certainly suggests a potential for gains in similar sectors. However, the mixed signals from analysts regarding current valuations, potential for near-term corrections, and the complex dynamics of the energy sector indicate that investors should proceed with a degree of caution. A diversified portfolio, thorough due diligence, and consideration of both historical trends and current market conditions are crucial for making informed decisions.

The Importance of Individual Company Analysis

While broad sector predictions can be useful, investors must delve into individual company fundamentals. The divergence in performance within the energy sector following the 2016 election underscores this necessity. Simply betting on a sector as a whole could lead to losses if individual companies do not align with the broader sector trend. A robust investing strategy involves a thorough examination of financial statements, business models, and management competencies, along with an understanding of the company’s position within its particular market segment.

The upcoming years will undoubtedly be dynamic, with potential shifts in economic regulations and policy impacting various sectors differently. While insights gleaned from the 2016 period provide valuable context, they should not be interpreted as predictions of certain outcomes. A sophisticated investment strategy combines both macro-level and micro-level analyses, leveraging historical data while adapting to changing market realities.