How the market reacted when Trump won in 2016

Piper Sandler explained in a note this week that when Donald Trump won the 2016 U.S. presidential election, the overall market response was muted, but significant sector-specific moves occurred.

The investment firm said financials, especially banks and insurance companies, led the way with substantial gains. Sallie Mae rose 37%, and Freddie Mac surged 97% within seven trading days.

According to Piper Sandler, bonds and bond proxies, such as utilities and REITs, sold off as investors anticipated an expansionary fiscal package and lower corporate tax rates.

The healthcare sector, particularly pharma and biotech, experienced a rally. Piper Sandler noted that the biotech ETF rose over 10% the day after the election, with Pfizer seeing a 7.1% increase.

Conversely, hospitals like HCA, LifePoint Health, and Centene, which were heavily tied to Obamacare, declined by double digits due to concerns about a potential repeal of the ACA.

Traditional energy stocks, led by coal producer Peabody, which jumped 50%, rallied while alternative energy stocks sold off. Defense stocks also rose.

According to Piper Sandler, trade-related issues caused the Mexican peso and Kansas City Southern, a railroad company reliant on trade with Mexico, to drop. U.S. Steel, benefiting from anticipated tariffs, climbed 17%.

Piper Sandler observed that small-cap stocks, including for-profit prisons and colleges, saw some of the largest moves. Interestingly, gun makers, which were shorts in the Clinton portfolio, fell about 15% as the threat of gun control diminished, leading to an expected drop in gun sales.

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