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Get ready for four years of pay-to-play deals, corporate back-scratching, and a public unprotected from scam artists.
There’s even a name for what investors have been doing since Donald Trump’s election victory on Tuesday: the Trump Trade. But most of the surge in the major indices took place at the opening bell on Wednesday; since then, gains have been modest. You have to dig into the numbers to see who really benefits from a Trump election.
With an expected corporate tax cut that goes even deeper than the current 21 percent, everyone will be a winner at some level. There will be some relative losers too: clean-energy companies, for example, and maybe the auto industry if loosened mandates on electric vehicles domestically make them globally uncompetitive.
Some industries come to mind that are poised to be above the curve. The oil and gas industry is going to get a boost from the next administration using some provisions of the Inflation Reduction Act to hand out more leases for public lands, and whatever else they want. Extricating corporate America from the shackles of Lina Khan and Jonathan Kanter is going to lead to a pent-up merger boom, and the industries most likely to take advantage are entertainment companies and banks. Big Tech probably feels like they can return to the “catch and kill” days of slaughtering nascent competition as well. Matt Stoller breaks some of this down here.
But if you just look at this chart of the top stock gainers of the week, while throwing out the small-cap anomalies, some patterns emerge.
MoneyLion is up 61 percent this week. This is a company that provides online installment loans, and has been in trouble with federal regulators for nearly the entire Biden administration, mostly for violating the Military Lending Act by overcharging service members. The nature of its business is rather scammy: MoneyLion advertises 5.99 percent APRs for its loans, but then requires customers to enroll in a membership program that includes a monthly fee, which pushes the actual rate of interest for the loans much higher.
The run-up on MoneyLion stock suggests that investors believe, correctly, that consumer protection, which made a comeback in the past four years, will be destroyed again by the chief executive whose history of consumer scams is well documented.
Two other big risers this week are CoreCivic (up 72 percent this week) and GEO Group (up 61 percent). We haven’t heard much from these two private prison companies in the last four years, but Trump’s first term corresponded with their salad days. Then-Attorney General Jeff Sessions got rid of a directive from late in the Obama administration to phase out private contractors from federal prisons, after two of Sessions’s former aides became lobbyists for GEO Group.
But the prospect of running federal prisons isn’t the real value play here: These companies are contractors with Immigration and Customs Enforcement. The mass deportation and detention system imagined by Trump will need to be carried out by somebody, and the private prison companies are well positioned to do it. Trump has claimed “no price tag” for the deportation program, but don’t tell that to investors bidding up CoreCivic and GEO Group.
Then there’s the 41 percent increase in the stock price of Coinbase, the crypto exchange. This hardly needs to be spelled out: Crypto made a huge bet on buying the government and won. The Securities and Exchange Commission will no longer be a threat to them, and Congress will likely give them a deregulatory seal of approval.
There are other big gainers, of course: AI plays, drug companies (there’s no guarantee that Medicare price negotiation will continue), mining firms. But the common thread here is really corruption. Companies that curry favor with Donald Trump are going to be rewarded; companies that do not will take a step back. It won’t take long for CEOs to figure this out, and in fact they already have—witness how they are falling all over themselves to praise the election victory.
We can get ready for four years of pay-to-play deals, corporate back-scratching, and a public unprotected from scam artists. Good times.
