There's money to be made in the Trump trade, with utilities, energy and financial stocks among those benefiting from the shifting market tides.

"If anyone was shorting 2017 thinking Trump is going to cause some crazy volatility, they were wrong," Jay Woods, chief global strategist at Freedom Capital Markets, tells Investor's Business Daily's "Investing with IBD" podcast.

"The word of the day is earmuffs," he says, reiterating advice he gave in 2016 during president-elect Trump's first term. "This is an election year, and you're going to hear some crazy stuff, and guess what — the market is crushing it right now, and these (political) headlines are nuts."

The trick is to tune out political news, and even headlines about tariffs and trade restrictions. Earlier this week, Trump posted his intention to levy tariffs of 25% on imports from Mexico and Canada, moves which could have an impact on the U.S. economy.

Audio Version Of Podcast

Woods acknowledges the volatility that has accompanied the stock market's interpretation of Trump's impending trade policies. He points to the beginning of 2018 as an example of the adverse effects tariffs can have on the market.

In spite of tariffs imposed during the first Trump administration, Woods says markets were surprisingly calm. He expects this pattern to continue.

"If you were trying to predict what the market is going to do based on Donald Trump's tweets and Donald Trump's crazy quotes, you're going to lose money," he said. "You want to follow your trends, you want to follow the stocks that lead, the sectors that lead, and you'll be OK."

Woods notes the market's rotation into different sectors, with energy-related names and financial stocks among those benefiting from positive money flows since the election results became official in early November.

Utilities, Energy Hope Trump Focus Will Power Demand

Utility stocks are expected to benefit from Trump trade and policies focused on energy and computing. President-elect Trump's campaign promises to double-down on fossil fuels and expand drilling are raising expectations of an energy-friendly administration.

Meanwhile, energy demands are expected to rise as Trump's recent embrace of cryptocurrencies and promises to boost AI development to counter efforts in China will likely drive demand for power and electricity. Both are expected to raise the prospects for utility and energy stocks.

After solidly outperforming the S&P 500 for much of the year, the Utilities Sector SPDR ETF (XLU) is breaking out of a narrow flat base that began in late October. That sets up a buying opportunity for investors looking for nontech AI exposure.

"These are the setups from a risk-reward point of view that I love," said Woods. He points to expansion in nuclear that could benefit stocks like Vistra (VST) and Constellation Energy (CEG). Woods also says Dominion Energy (D) could also benefit from a renewed focus on energy.

The Energy Sector SPDR ETF (XLE), meanwhile, has dramatically lagged the major indexes for the bulk of the year. But since Nov. 6, the outperformance has been notable.

Trump Trade And Business Policies Likely To Boost M&A Among Regional Banks

Financial companies, particularly regional banks, are seeing momentum after Trump's election win. The president-elect is likely to continue reducing regulations and antitrust enforcement, creating a business environment friendly to mergers and acquisitions.

Regional banks, bruised by a regional banking crisis that felled names like Silicon Valley Bank and First Republic, are hoping a more lenient administration will spur acquisitions that boost balance sheets.

Potential beneficiaries include M&T Bank (MTB), with the stock extended after hitting new highs and seeing what Woods says is a "phenomenal tailwind." PNC Financial Services (PNC) is also riding this wave, rallying back to its prior highs from early 2022 on hopes of industry consolidation, he says.

"The leadership remains the big banks, but the regionals are starting to catch up," said Woods. "The tide is lifting those boats, and there's money to be made."

Active investors should be sure to heed proper entry points vs. chasing extended stocks. That could mean patience is required for those looking to trade these hot sectors since many stocks have been running powerfully for several weeks.

Tap here to learn the interesting truth behind today's market sentiment with Jay Woods.

Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.

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