There’s been no shortage of commentary regarding the extent to which market participants have “faded” popular Trump trades.
Everywhere you look, it’s readily apparent that traders are losing faith in the narrative. If you want a kind of 30,000-foot view, just look at the dollar and 10Y yields. That should tell you all you need to know about how the market is feeling with regard to Trumpian “reflation.”
But you can drill down further. Have a look, for instance, at the relative performance of high tax rate companies and/or small caps:
Or at infrastructure plays:
It’s the same story: the “Trump trade” is fading. And fast.
But there’s an exception that seems to be flying under the radar: private prison stocks.
To be sure, there are all manner of reasons to be bullish from the technical (see The DoJ’s move to rescind guidance from August that discouraged the use of private prisons) to the anecdotal (witness Trump’s inauguration speech that painted America as something akin to the opening scene in Terminator 2).
And then there is of course the overt: witness Trump’s promise to crack down on illegal immigrants and lock up “bad dudes” (or, “bad hombres,” to use a popular Trumpism).
The companies set to benefit disproportionately: CoreCivic (the artist formerly known as Corrections Corporation of America), and The Geo Group. Both of which are major Trump donors.
That leads us to the one chart which, as the title here suggests, shows that even if the market has lost faith in tax reform, healthcare reform, fiscal stimulus, and a sustainable upturn in growth more generally, one thing no one has lost faith in is Trump’s willingness to usher in a mass incarceration renaissance:
As you can see, “mass incarceration” looks to be an even surer bet than “war.”
That speaks volumes about where we may be headed as a society.
Draw your own conclusions.