As global financial markets continue to sort through the long-term impact of Donald Trump’s U.S. presidential victory on Tuesday, November 8, 2016, one thing is certain: there were both winners and losers in the immediate aftermath. Among U.S. moat companies, several sectors and individual stocks wavered in the week preceding the election and reversed course in the days that followed. Overall, moat companies that benefited from the election outweighed those that suffered. Election Results Benefit U.S. Moats
Positive Reversal of Fortune on Trump Victory
Throughout the week leading to the election (November 1 to November 8), several stocks within the U.S.-oriented Morningstar® Wide Moat Focus IndexSM (the “Index”) (MWMFTR, or “the U.S. Moat Index”) posted unimpressive returns. Companies from the healthcare sector such as Allergan plc (AGN), AmerisourceBergen Corp. (ABC), McKesson Corp. (MCK), and Amgen Inc. (AMGN) struggled with the prospects of potentially higher regulation and price controls under a possible Clinton administration. Following Trump’s election, these companies recovered significantly. Banking, which also stands to benefit from potentially reduced regulations and higher interest rates under Trump, received a boost led by Index constituent Wells Fargo & Co. (WFC).
Five Largest Reversals in Pre-Election versus Post-Election Performance
Morningstar Wide Moat Focus Index
Pre-Election Period: 11/1/16 – 11/8/16; Post-Election Period: 11/9/2016 – 11/10/2016
Click to enlarge. Source: Morningstar; FactSet. Past performance is no guarantee of future results. Not intended to be a forecast of future events or investment advice.
Tech Companies among those Hurt by Threat to Skilled Foreign Workers
On the flip side, several U.S. Moat Index constituents struggled following the election. Amazon.com, Inc. (AMZN), Starbucks Corp. (SBUX), Western Union Co. (WU), and Salesforce.com (CRM) were among the negatively affected stocks. Immigration policy uncertainty appears to be impacting tech companies who rely on foreign skilled employees or that have significant Mexican and Latin American business ties.
Moat Companies Positioned for the Long Term
Although many of these post-election trends may be short lived, the idea of investing in attractively priced quality companies remains a long-term proven strategy. Year to date through November 15, 2016, the Morningstar Wide Moat Focus Index has outperformed the S&P 500® Index by 12.43% (21.17% vs. 8.74%). Taking an even longer view, the Index has bested the S&P 500 Index for the five years ended November 15, 2016 (15.99% vs. 14.05% on an annualized basis), according to Morningstar data.
The VanEck Vectors™ Morningstar Wide Moat ETF seek to replicate before fees and expenses, as closely as possible, the price and yield performance of the Morningstar Wide Moat Focus Index.
Index performance is not representative of fund performance. For fund performance visit vaneck.com/moat.
The Morningstar Wide Moat Focus Index consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are the most attractively priced, according to Morningstar.
The S&P 500® Index consists of 500 widely held common stocks covering the leading industries of the U.S. economy.
The Morningstar® Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors Morningstar Wide Moat ETF and bears no liability with respect to the ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index is a service mark of Morningstar, Inc.
