Trump Elected; Steels, Autos, Banks Biggest Winners

It’s exciting to see significant market moves like the ones we witnessed yesterday, as they provide valuable insights. Let me explain. As a synthesizer of large data sets, SIA thrives on days with substantial market shifts—moments when SIA practitioners take a screenshot to refer back to later. Much like a card player who accidentally reveals their hand, markets sometimes expose key insights on pivotal days, like yesterday. Could this indicate what the next phase of investing might bring in terms of asset classes and sectors? Of course, the sheer volume of data can be overwhelming, and without a powerful AI platform like SIA, this analysis would be nearly impossible. If you asked 50 advisors what the big move was yesterday, many experienced market operators would point to the banks. However, two sectors that saw the biggest moves were steelmakers and the auto industry. This mirrors the unusual movements we observed earlier in the summer when names like General Motors and Algoma Steel, as well as many small-cap industrial stocks, showed strong momentum. Looking back, it seems the markets had already priced in a Trump victory—though it was difficult to see the forest from the trees at the time. Now that a Trump White House is now certain, it’s time to reflect on the findings leading up to the election and dive deeper into areas that require more analysis to uncover additional opportunities. One of the major elephants in the room is the impact of Obamacare and the challenges it presents for healthcare and insurance companies, but we’ll leave that discussion for another day, after the SIA platform has had a chance to analyze these sectors in the coming weeks and months. The other big mandate from the Trump administration is the “America First” approach, especially when it comes to the production of goods that are Made in America. At the heart of this is steel, and the struggles of steelmakers are central to the new administration's agenda. Earlier this summer, on July 23rd, the SIA AI detected a shift in the behavior of Algoma Steel Group Inc. (ASTL.TO), which we attributed to movements in Ford Motor Company and General Motors—both of which were making their own moves. SIA also observed that money was beginning to flow into small-cap companies, particularly small-cap industrials. Looking back now, these early signals may have been indicators of a Trump victory. Now that Trump is, in fact, President of the United States, what does this mean for the steel industry? In today’s Equity Leaders Weekly, we’ve built a custom steel manufacturing matrix to analyze, from a technical perspective, the best names this sector has to offer investors.

As a proxy for U.S. steelmaking, we are using the chart of United States Steel Corp (X), an integrated steel producer headquartered in Pittsburgh with operations in the U.S. and Central Europe. Once the eighth-largest steel producer globally in 2008, the company ranked 24th in 2022, supplying steel to industries including automotive, construction, and energy. From a technical perspective, shares of X underperformed during Trump’s first term in office but performed better under the Biden administration (see red and blue arrows). However, in yesterday’s trading, X rallied 8.27%, improving its relative strength against the broader market.The primary technical challenge is the long-term resistance at $43.98, which dates back to 2018, and further resistance at $49.53, which aligns with the key $50 level. Support levels are found at $39.05 (3-box), intermediate support at $37.53 (from 2022), and long-term support at $35.37 (dating back to 2017). Currently, shares of U.S. Steel carry a 9/10 SMAX score, outperforming asset classes like bonds, cash, commodities, currencies, and other equities.

Turning to the SIA Custom Steel Manufacturing Matrix, which monitors this important sector in Trump’s portfolio, SIA has crawled 35 stocks at a 6% scale comparison, and the results are revealing. Leading the list is Carpenter Technologies, a high-end metal producer for tech and advanced manufacturing sectors, followed closely by Universal Stainless & Alloy Products, which offers similar products but has a smaller market capitalization. Lower on the matrix but still in the favored zone are Algoma Steel Group Inc. (ASTL) and United States Steel Corp (X), which improved 15 relative strength positions yesterday alone. Also worth noting is Tenaris (TS), a global steel pipe manufacturer primarily for the energy industry, which has also climbed in the relative strength matrix. This could tie into Trump’s energy independence mandate. Overall, this exercise provides valuable insights into the steel industry, offering a first point of reference for the coming months and years.