Election Day sent crypto, bank, and oil stocks soaring
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Trump’s win sent the cryptocurrency, banking, and energy sectors soaring. On Wednesday, the Financial Select Sector SPDR Fund (XLF) added 6.1%, VanEck Vectors Oil Services ETF (OIH) gapped higher by nearly 9%, and Invesco Galaxy Bitcoin ETF (BTCO) gained 9.8%. It will be interesting to see if any subsequent consolidation on the charts shakes loose call traders; both XLF and OIH boast 10-day buy-to-open call/put volume ratios of 2.57 and 2.85, respective skews that also rank in the 85th and 99th percentile of their annual range.
Back in September we also identified alternative energy, homebuilding, and cannabis as sectors hoping for a Harris win. Sure enough, Invesco Solar ETF (TAN), iShares U.S. Home Construction ETF (ITB), and AdvisorShares Pure US Cannabis ETF (MSOS) all fell on Wednesday, the latter shedding 27.6%.
ITB has support in place at its 100-day moving average, and homebuilding stocks in general tend to be steady amid volatility. The same cannot be said for MSOS or TAN, the former now trading at $4.95, a far cry from 2021 highs above $55. TAN is now down 30% in 2024 and on Friday fell to a four-year low of $36.16. TAN’s long-term chart looks just as bleak; the ETF spent most of 2024 in a consolidatory pattern, and the massive 2020 and early 2021 run-up to $117 has seen carved a channel of lower highs.
With a new administration recommitting to drilling and skeptical of alternative energy in general, an already-shaky sector mostly driven by hope for progressive reform seems to be fading into the background. You can copy and paste the same narrative for cannabis.
The Russell 2000 Index (RUT) outperformed the Dow, SPX, and Nasdaq on Wednesday, adding 5.8% -- its best single-session gain since November 2022 -- as small caps cheered the potentially lower corporate tax rates from a Trump administration. Small caps are also reactive to growth economies and interest-rate cuts, yet after the 25-basis point cut from the Federal Reserve on Thursday, the RUT shed 0.4%. Good luck figuring that one out.
It wouldn’t be an election postmortem without talking tariffs. The Trump campaign promise of a blanket tariff on 10%-20% on all imports, plus an additional 60%-100% tariff on China, packaged to the public as a way to shore up domestic production and pad U.S. coffers. Ignoring for a second what that could do to domestic prices, U.S.-listed China ETF iShares MSCI China (MCHI) lost 2.7% on Wednesday and then 5.7% on Friday, the latter’s drawdown occurring after the National People’s Conference fiscal measures disappointed.
