How to Trade the U.S. State of the Union

One of the best ways to spot market opportunities is to listen to the State of the Union.

For example, following President Trump’s speech on the night of February 5, 2019, we could clearly see the impact on drug stocks, defense stocks, and infrastructure stocks.

Drug stocks took a hit on this key statement:

"This is not an option. This is a necessity. The next major priority for me and for all of us should be to lower the cost of health care and prescription drugs and to protect patients with preexisting conditionsAfter my election in 2018, drug prices experienced their single largest decline in 46 years. "But we must do more. It's unacceptable that Americans pay more than people in other countries for the exact same drugs made in the exact same place." 

While such a statement was nothing new, it still had a temporary sting with it.

Merck (MRK) and Pfizer (FPE) for example were both down slightly in morning following the State of the Union.  Again, though, such a statement from Trump has been heard before.  So, the bearish impact wasn’t as troubling for investors.

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Defense Stocks Got a Boost

Trump spoked about the $716 billion set aside for military spending in 2019, in addition to the $700 billion spent in 2018. He also referred to a $100 billion increase in spending from NATO allies, noting the U.S. “will outspend and out-innovate all others by far.”

“Boasting about the current funding for defense spending and taking credit for additional contributions from allies, President Trump set a hawkish tone for continued robust levels of defense spending,” said Ed Mills, public policy analyst at Raymond James.

Lockheed Martin (LMT) got a boost immediately following the SOTU, as did Raytheon (RTN).

Infrastructure Stocks are Higher, Too

In his State of the Union, Trump also asked for a bipartisan infrastructure push, urging both parties to help rebuild aging, troubling U.S. infrastructure. “I know that Congress is eager to pass an infrastructure bill, and I am eager to work with you on legislation to deliver new and important infrastructure investment,” he noted.

While stocks didn’t move much after the SOTU, they’re still worth watching, as Trump calls out the needed improvements to ailing U.S. infrastructure.

Historically, all State of the Union addresses have an impact on stocks.

You just have to be willing to listen to what the President has to say.

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