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The “Trump Trade” is Back from Dead

Louis BaseneseIt’s a tough time to be Donald J. Trump.

White House infighting, rifts with Congress and a raving lunatic overseas threatening a missile strike on the United States…

The first eight months of the Trump presidency have been anything but smooth.

But the sky isn’t falling, either.

Since Trump took office, GDP is up, unemployment is down and the confidence of American businesses hasn’t been this high in a decade.

Not to mention all three major U.S. stock benchmarks are sitting just below all-time highs.

And while the politically divisive health care bill stalled, Trump’s business-friendly growth policies are on deck for Congress — with a much higher probability of success.

A win here will unleash a torrent of wealth for investors.

Below, senior analyst Jonathan Rodriguez shows you exactly why it’s time to get excited about the next leg of the Trump legislative agenda.

Ahead of the tape,

Louis Basenese
Chief Investment Strategist, Wall Street Daily

Taxes Are About to Die by the Sword

Jonathan RodriguezThese days, U.S. stock investors are some of the most optimistic people around.

Fueled by excitement over the president’s pro-growth agenda — the likes of which haven’t been seen in 30 years — American stocks have added more than $3 trillion in value since Election Day.

To be sure, Trump’s comments on the protests in Charlottesville have dampened the market’s enthusiasm a bit.

But the heart of the president’s economic policy package is about to make its way through Congress: tax reform.

As you may know, President Trump wants to cut corporate tax rates by 20%. He also aims to cut middle-class taxes and simplify federal personal income tax brackets.

And the corporate tax cuts alone will unlock massive wealth for shareholders…

The Dormant Volcano of Profits

In a CNBC interview earlier this year, UBS managing director Vinay Pande said that every 5% reduction in the corporate tax rate translates to an increase of 4% in EPS.

And Michael Thompson, president and chairman of S&P Investment, and a team of number crunchers found that a drop in corporate taxes to 15% would bring S&P 500 2017 earnings up to $158.20 from $132.

Using the S&P’s current forward-earnings multiple of 18.7, that would imply upside of about 22% from its current level.

And even if we get to 20% from 35%, that would bring EPS up to $145.10. That’s upside of about 12%.

Add it all up and the tax cuts could add anywhere from $80 billion–$200 billion back to the bottom lines of S&P 500 firms this year.

This is the kind of stimulus that mints millionaires out of investors.

Here’s a cheap way to play the unleashed action…

All That Glitters Is Gold

As you can imagine, if and when Trump’s tax cuts are passed into law, inflation is bound to rise quickly.

According to the Tax Policy Center, Trump’s plan would result in $6.2 trillion in cuts over the next 10 years.

That’s a lot of capital going back into American wallets, both corporate and consumer.

And along with stocks, the asset class most likely to benefit from inflation: gold.

Amid mounting geopolitical tensions, gold has already been on the rise.

But while you might be tempted to buy physical gold — or even shares of “paper” gold ETF GLD — the bigger play is in the miners…

The precious metal is up about 6% over the last month.

And shares of gold miners — which have cleaner balance sheets than they have in years — are up 12% over the same period.

If you’re looking for a quick pop on the tax cuts, consider the VanEck Vectors Gold Miners ETF (GDX).

Not only will the fund rise with inflation, but it also serves as a solid hedge against stock market shocks — a win-win.

Bottom line: Don’t buy into the noise. Ahead of the president’s landmark tax legislation, it’s time to buy stocks, not sell them. And gold miners offer investors the perfect way to play the upside — and cushion on the downside.

On the hunt,

Jonathan Rodriguez
Senior Analyst, Wall Street Daily