These Are the Stocks That Have Lagged Under Trump

For clues on the strength of the current rally in developed-market equities, take a look at stocks that have trailed since Donald Trump was elected.

They’re in sectors such as real estate, utilities, consumer staples and telecommunications which underperformed cyclical stocks in the aftermath of the presidential vote. Although they lagged behind as investors preferred shares tied to the economic growth, they are now joining the party.

Europe’s health-care sector, for example, has gained 4.8 percent in the first half of February. This signals the rally is broadening, according to Makor Capital Markets’ Stephane Barbier de la Serre. In Europe, real estate along with health care and utilities is among the top performers this month. In the U.S., the trend is less pronounced, though drugmakers, technology and consumer staples are each up least 2.5 percent in February.

“In the first part of the Trump rally, the defensive sectors were left behind,” Barbier de la Serre said in an interview from Geneva. “They’re now rising along with the cyclical sectors which shows the equity rally is getting stronger and stronger. A lot of big investors had doubts about this Trump rally, and are now scrambling to unwind negative positions and turn bullish.”

The surge in U.S. shares, which carried the S&P 500 index almost 5 percent higher in the month after the November election, lost steam earlier this year. Investors’ conviction is returning -- and they are buying sectors they initially left behind. Real estate shares, which usually suffer when bond yields rise, have been gaining even as benchmark bond yields climbed in the past week in the U.S. and in Europe.

JPMorgan technical analyst Jason Hunter wrote in a Feb. 14 note that the rally in U.S. stocks has entered an “acceleration phase with broad sector participation.”

With sentiment fueled by the Federal Reserve’s stance that more interest-rate hikes are imminent should the world’s largest economy stays on course, stock volatility has dropped in both regions. Helping are also the U.S. president’s promise of “phenomenal” tax reform coming in the next couple of weeks as well as expectations that inflation will pick up.

    Before it's here, it's on the Bloomberg Terminal.