Leading up to last week’s presidential election, there was ample speculation and concern that a victory by Republican Donald Trump would be damaging for stocks.
Yet the Dow Jones Industrial Average finished higher by more than 5%, soaring in the three trading sessions following Trump’s surprising victory in last Tuesday’s election.
Subscribers to the Dow Theory should take heart because the iShares Transportation Average ETF (NYSEArca: IYT) also surged more than 5% last week. According to the Dow Theory, IYT may still plod along as the Dow Jones Industrial Average trades above key levels.
The Dow Theory stipulates that if an upward trend in one of its industrial or transportation averages increases above a previous high, it is accompanied by a similar advance in the other index.
Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads, have struggled.
The chart of “the Dow Jones Transportation Index, tells the story: after a strong retracement in January of this year, pulling the index back to secular support, it is now on the rise again with no visible resistance until the previous peak of 9250 points, a rise of 9%,” according to ETF Daily News.[related_stories]
The SPDR S&P Transportation ETF (NYSEArca: XTN), an equal-weight spin on transportation stocks, was even better last week, surging 8%.
The U.S. Global Jets ETF (NYSEArca: JETS), the lone dedicated airline ETF, is another transportation to consider.
SEE MORE: Airline ETF Flying High
JETS follows the U.S. Global Jets Index, which uses fundamental screens to select airline companies, with an emphasis on domestic carriers, along with global aircraft manufacturers and airport companies. JETS notched an impressive post-election performance of its own, gaining nearly 7% last week.
However, if the dollar falls as markets price in the Federal Reserve not being able to raise interest rates in December following Trump’s victory, industrials could benefit because some members of the sector generate substantial portions of their revenue overseas. Transportation stocks are part of the broader industrial sector.
iShares Transportation Average ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.