Sell Southwest Airlines (LUV)
Donald Trump defeated Hillary Clinton and Republicans maintained control of the House of Representatives and the Senate after an election that pitted a bombastic outsider against a career politician. Trump’s win initially sent overnight Dow Jones industrial futures down 700 points in pre-market trading, before partially recovering to a decline of 300 points as I write.
The stock market will probably produce some wild swings during the next several days before settling down. Investors will need to decide whether Trump’s policies will help the economy grow faster through tax reform and fiscal stimulus, or whether the economy will be hurt by restrictions on trade and immigration.
When the dust clears, some sectors will become winners. Healthcare and bank stocks could benefit from lower regulatory risk under Trump and a Republican Congress. Infrastructure and defense stocks could receive a boost from Trump’s pledge to rebuild America.
Now that the uncertainty of the election is behind us, I believe the stock market will find its footing fairly quickly (within a few days) and begin to bounce back. During the next several days, I recommend carefully buying beaten down stocks, especially in the drug, bank, infrastructure and defense sectors. The sky is not falling—it’s just a little cloudy. Don’t panic!
One stock that I recommend selling now is Southwest Airlines (LUV), which reported weak sales and earnings. Increasing costs could put a damper on earnings for an extended period. I recommend selling your LUV shares now.