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Weekly Wrap: How Trump's Win Affects Stocks

Our analysts give their takes on how the new administration will impact the healthcare, industrials, and consumer sectors.

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Jeremy Glaser: What does Donald's Trump victory mean for stocks? This time on the Morningstar Weekly Wrap.

As the market looked for clues as to what the Trump administration might mean for the economy over the last few days, our team of stock analysts has been looking at what the impact could be across sectors. Overall, we're not expecting major changes to our fair value estimates and our advice to investors has been to not to make any sudden moves.

With the potential for a repeal or major reworking of Obamacare, healthcare firms were in focus this week. Vishnu Lekraj thinks there could be some big changes, but there is a lot of uncertainty.

Vishnu Lekraj: With the prospect of President Trump, there is great uncertainty within the healthcare space moving forward. Very little detail has been given by the to-be administration and very little detail from the Republican congress. What we do know is that there are going to be tweaks and marginal changes to the Affordable Care Act, and this will affect our moats and our valuations for many of these companies. So overall what does this mean for investors, a lot of uncertainty and right now we believe you should wait and see. There is no detail right now from the current administration, no detail right now from the to-be administration to act on. We will make changes to our valuations and our moats as we see fit.

Glaser: In industrials we see a wide range of possibilities across industries. Our Keith Schoonmaker has more.

Keith Schoonmaker: In industrials we cover a variety of firms that are effected differently by the results of the election. One thing we can say for certain is that we think uncertainty has increased as a result of the election. We think there's also a mix of countervailing forces that will benefit or hinder industrial firms. Take for example, protectionism or U.S. manufacturing renaissance--these are somewhat countervailing for diversified industrials like GE or Emerson. There's also potential for investment in the infrastructure that's probably stronger than it was previously with a Republican administration now. This can benefit firms like Caterpillar, Terex, and the engineering and construction firms like Fluor. Firms that may have increased downside as a result of the election include Kansas City Southern, which earns about half of its revenue from its Mexican operations and about 35% of its revenue from border-crossing with freight. So bringing automobiles into the U.S., if this is less advantageous, this could hurt Kansas City Southern. So overall, we encourage investors to focus on the fundamentals, don't worry too much about uncertainty, recognize it's expanding and don't become overwhelmed with market sentiment, focus on the fundamentals of high-quality moaty industrials.

Glaser: Erin Lash says that changes to trade deals could weigh on some consumer firms but that there are some good buying opportunities in the sector.

Erin Lash: Despite the potential for near-term stock market volatility following Donald Trump's unlikely presidential victory, in general, the longer-term impact on consumer stocks is far from clear.

For one, changes to trade barriers and/or immigration policy could ultimately emerge, but we don't foresee this having a material impact on brand intangible assets for players that operate in Mexico for instance, given the vast geographic footprint these firms maintain to offset cost pressures. And we would suggest investors consider alcoholic beverage firms like Diageo as potential investment ideas.

Further, comprehensive trade barriers with China could ultimately stand to benefit firms and industries that have fallen victim to Chinese imports and would suggest investors consider home furnishing operators like Williams-Sonoma, which trades at a material discount to our valuation.

Overall, the near-term uncertainty has done little to alter the long-term cash flow profiles for moaty names like narrow-moat Hanesbrands, wide-moat P&G, and wide-moat Starbucks, and we'd view all as attractive investment ideas at current levels.

Glaser: And in case you missed it, we’ve had complete coverage of the election including Bob Johnson's take on what it could portend for growth.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.