Stocks with exposure to overwhelming small and medium sized companies

  • President Donald Trump likes to take credit for stock market records, but his influence in the market has been questioned in recent months.
  • However, its impact remains undeniable in one area: the companies most exposed to small and medium-sized enterprises.

President Donald Trump indulged in one of his favorite pastimes this weekend: taking credit for the latest stock market records.

“The reason our fellowship is so successful is because of me,” Trump told reporters on Air Force One. “I’ve always been great with money, I’ve always been great with jobs, that’s what I do.”

Whether he is right is a complicated question. We at Business Insider weren’t shy about throwing water at Trump’s claims that he catalyzed record stock market gains, at least in recent months. We also conducted an in-depth investigation into alternative explanations for a booming market.

But despite our skepticism, new analysis from Goldman Sachs suggests that one sector of the market continues to thrive as so-called Trump trading: companies with heavy exposure to small and medium-sized businesses.

An index maintained by Goldman that tracks the group has soared 38% since the election, nearly double the return of the benchmark S&P 500. And it has done so largely on the prospect of a less regulation for small businesses, a prospect that pushed the NFIB Small Business Optimism Index to a 12-year high in the months after Trump’s victory.

11 6 17 COTD small and medium enterprise exhibition

An index of small and medium-sized companies exposed has nearly doubled the return of the S&P 500 since the election.

Goldman Sachs

“Small business owners have been excited about the prospect of deregulation under the Trump administration,” said David Kostin, chief US equity strategist at Goldman.

Also noticeable in the chart above is the lighter blue line, showing the post-election performance of the more small-cap focused Russell 2000 Index and the S&P 500. After peaking against the benchmark in the months immediately following the election, the Russell has simply matched the performance of its large-cap peers since then.

Overall, it’s clear that investors are still looking for Trump’s trades to grow as the president continues to make loud statements. And while the choices are slimmer than in the past, there are still opportunities, if you know where to look.

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