Goodbye Digital, Hello Physical

Is the election over already?

Sure, Election Day is Tuesday, Nov. 5. But the election is happening in real-time and will mostly be over by the end of this week because of early voting, mail-in ballots, drop boxes and ballot harvesting.

These votes won’t be counted until Election Day, but they are being cast now, so hopefully somebody will be watching this time.

It goes state by state, so different states have different laws, obviously. But in many states, the voting has already begun. In many cases, it was Oct. 11. Other states opened up on Oct. 15.

But the point is a lot of the voting has already happened, and a lot more is going to happen during this week.

So the election will be over before Election Day. We won’t know the results until Nov. 5, but the election’s very largely over in the middle of October. (That’s why the “October surprise” of past election cycles is obsolete.)

Polls Pointing to Trump

This timing is another reason why I believe Donald Trump will win this election. Polling has swung to the Trump camp in the past few weeks. This momentum has come at the right time as early voting began in critical battleground states.

But once voters have cast their votes and a winner is declared next month, the election will not be over. Why? Because the Democrats have another lawfare trick up their sleeves in anticipation of a Trump victory.

But let’s assume for the moment that Trump wins the election and actually takes office in January. What market sectors should do well under a second Trump administration?

Here are some of the sectors that will benefit with a Trump victory in November:

• Oil and natural gas drilling, production and refining

• Mining (gold, silver, copper, lithium)

• Defense (especially in contractors with good research and development programs. We need new technology, not just more of the same weapons)

• Automobile manufacturing focused more on internal-combustion engines rather than electric vehicles.

The Return of the Physical

I would also look at sectors that benefit from lower oil and gas prices including trucking and airlines.

Trump’s agenda will incentivize billions of dollars of investments in U.S. energy and manufacturing jobs. He’ll make domestic oil drilling and refining a top priority which will provide America with energy independence. This will also benefit companies (and provide more jobs) in the energy sector.

He’ll also eliminate the Green New Scam by reducing spending on wasteful projects like Kamala Harris’ EV mandates. This will allow automakers to shine once more by producing more automobiles with traditional internal-combustion engines.

In short, a second Trump term could ignite a boom in the physical world. This stands in stark contrast to most of the past 15 years, which have seen the domination of investments in the digital, online world.

Since most investors’ portfolios are outweighed with popular, mega-cap technology stocks, few are positioned to profit from this trend. You shouldn’t be one of them.

Refiners, Refiners, Refiners! 

Here, my senior analyst, Dan Amoss, lays out the investment case for refiners, which should thrive under a second Trump administration:

One sector you should pay attention to is refiners because U.S. refiners are in a new golden age. Two years ago, you may recall hearing news stories about tight diesel supplies across many areas of the U.S.

The Biden/Harris administration has constantly promised action to “fight” high prices for gasoline and diesel. However, this administration has only made politically expedient, short term-oriented moves like draining the Strategic Petroleum Reserve.

The cold, hard reality that green energy advocates need to accept is that the billion-plus fleet of internal-combustion engines around the world will need diesel and gasoline for decades into the future.

Pandering to a political base of radical environmentalists will only result in the loss of political power, whether it’s in the U.S. or Europe.

Until we see more political support to maintain U.S. oil, gas and refining production capacity — and years of catch-up investments are made — we’ll keep bumping up against constraints.

Demand for refined products remains strong despite high prices. Gasoline and diesel prices might seem high, but that’s only because it’s natural to make a mental anchor to super-low prices in 2020 and early 2021.

Why U.S. Refineries Are in a New Golden Age

Hydrogen is a crucial ingredient in the oil refining process. It dilutes the carbon in the end product, which allows for increased production of high-quality fuels. Where do refineries get hydrogen?

They get it from natural gas. Access to lower-cost natural gas is why U.S. refineries will enjoy a huge competitive advantage versus competing refineries in Europe and Asia.

Natural gas prices in Europe have cooled off over the winter as demand has slowed. In recent years, Europe has enjoyed some of the warmest winters in memory. But it won’t always be unseasonably warm.

Another surge in natural gas prices will remind investors that it will be difficult to profitably refine crude in Europe. The continent may see more refinery shutdowns in the years ahead.

If so, it will rely more on imported products from geographies that have been investing in refineries, including the Middle East. Mothballed European refineries act to tighten refined product supply, which boosts profits at U.S. refiners.

Sanctions on Russian refined products have tightened refined product supplies — especially distillates (heating oil and diesel). Of course, Russia gets around sanctions by exporting to third parties. But the net effect is an increase in miles traveled for the global refined-product tanker fleet.

That means there are more refined products on the water and fewer products sitting in onshore tanks. Tighter onshore supplies keep prices high.

Meanwhile, U.S. refining capacity has been in a downtrend since COVID. So even if demand for gasoline and diesel falls in a recession, tighter refining capacity will cushion the downside risk in refining margins.

We like to recommend cyclical stocks when their sectors have been underinvesting. Refining has been underinvesting for several years, so it’s a good time to own refiners. The mid-2000s was a golden age for U.S. refiners. Profits were high and consistent, and refining stocks left the S&P 500 in the dust. Now we’re looking at another golden age.

Gold: The “Everything Hedge”

Returning to the election, Trump is in a good position to win. Still, the uncertainty factor and element of surprise make it too soon to issue a final prediction. And if the Democrats have their way, Trump could be in for a battle to take office even if he wins. So there’s still a lot of uncertainty.

Markets hate uncertainty. That’s why volatility will be high for the next several weeks in several sectors of the market.

It’s a perfect scenario for owning gold. I call gold the “everything hedge.” It hedges you against political uncertainty, stock market collapse, geopolitical risk, social unrest and an attack on the U.S. dollar. So gold serves all those purposes.

That’s why I recommend 10% of your investable assets be allocated to gold. It’s excellent insurance that’ll give you peace of mind in uncertain times.