What to Do With Your Portfolio Today

America's real election day is here... The 'Trump Trade' rolls on... What to expect in the new year... Big questions remain... What to do with your portfolio today...

By the time you read this, it will likely be official...

Today, Donald Trump is expected to be formally elected president of the United States by the 538 members of the Electoral College. Electors representing the 50 states and Washington D.C. are scheduled to meet and cast their votes by 5 p.m. Eastern time tonight.

This process is typically routine, with electors voting according to the results of their states' popular vote. This gives Trump 306 expected electoral votes, compared with 232 for Hillary Clinton.

But this year, many critics have called for electors to "defect" and vote for an alternative candidate. In theory, if enough electors defected, someone other than Trump could become the next president. But this is unlikely...

First, in 29 states and the District of Columbia, electors are legally bound to vote for their state's winning candidate. In the others, electors can legally defect, but rarely do...

According to political newspaper The Hill, there has never been more than one defector in any presidential election since 1836. As the Electoral College itself notes, this is because electors tend to have a lot to lose if they do...

It is rare for electors to disregard the popular vote by casting their electoral vote for someone other than their party's candidate. Electors generally hold a leadership position in their party or were chosen to recognize years of loyal service to the party. Throughout our history as a nation, more than 99 percent of electors have voted as pledged.

Second, it would take a significant number of defectors to upset Trump's victory. Because 270 electoral votes are required to win, at least 37 Republican electors would have to vote for an alternate candidate.

But unless all 37 of these electors also vote for Clinton (unlikely), neither candidate will have the 270 votes needed to win the election. In this case, the decision would be made by the Republican-controlled House of Representatives... which is unlikely to upset constituents by voting against Trump.

In other words, while technically possible for someone other than Trump to win today, it's highly unlikely.

In the meantime, the "Trump Trade" rolls on...

As we've noted in recent Digests, stocks have been on fire since last month's election. The three major U.S. indexes – the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite – are up more than 5% since then.

Small-cap stocks have done even better... The benchmark Russell 2000 Index is up a huge 15% over the same period...

The U.S. dollar has soared, too...

It's up more than 5% – virtually the same as the S&P 500 – a massive move for a major currency...

Meanwhile, bonds have been absolutely crushed... The benchmark 10-year U.S. Treasury has fallen more than 5%, pushing its yield up more than 36%...

And as Porter discussed on Friday, gold has fallen, too. It's down a little more than 10%...

Again, we believe these trends are getting extremely stretched in the near term.

The last couple weeks of December tend to have a strong bullish bias, so the rally may continue through year end. But don't be surprised to see at least a short-term reversal – possibly a violent one – in the new year.

But what comes after is less clear...

Putting politics aside, we see some clear positives for investors already.

For example, stock market correlations – a measure of how similarly different stocks trade – have been plunging since the election. As the Wall Street Journal noted earlier this month, they're now sitting at multiyear lows, which is fantastic news for sophisticated investors...

Diverging moves in equities are creating what some say is the first opportunity for stock pickers to outperform in a decade.

The average correlation between S&P 500 sectors and the broader index has dropped to 0.57 in December, from 0.66 in November, according to New York-based brokerage Convergex, which crunches the data on a 30-day historical basis each month. The reading for this month is the lowest since the firm began tracking the data in 2009, and down sharply from 0.92 in September 2015.

Correlation measures the relationship between two assets, with a reading of 1 suggesting they move in lockstep, and 0 showing no relationship. The drop in correlation back toward average levels seen before the financial crisis means that individual stocks are effectively driven nearly as much by their own merits as by broader market moves.

Put simply, for much of the time since the 2008 financial crisis, stock correlations have been elevated. Fantastic and terrible businesses alike often moved up and down with the broad market, making it tougher for stock-pickers – including your Stansberry Research analysts – to outperform the market.

But since the election, this has changed. Not only are correlations falling, they're falling across the market. The Journal notes the top-performing S&P 500 sector at any time is usually highly correlated with the broader market. But the best-performing sector – financials – has just a 0.53 correlation to the S&P 500 today... down from 0.81 last month.

This could be great news for us. As one analyst put it to Journal...

"Donald Trump is throwing you your first lifeline in a decade," said Nicholas Colas, chief market strategist at Convergex, speaking about active managers. He said that a lot of the additional trading his firm's desk has seen since the election has been concentrated in individual stocks, rather than ETFs, a sign investors are honing in on specific bets.

Likewise, several notable investors believe Trump's election could be a game changer for the U.S. economy...

As we've discussed in previous Digests, they believe his plans to reduce taxes, cut "red tape," and boost manufacturing and infrastructure spending could spur strong economic growth for the first time in a decade or more.

We agree... But many questions remain.

If successful, Trump could create much higher than expected economic growth and inflation... at least for a while. Like the Trump Trade so far, this would likely be great for the U.S. dollar and stocks, but terrible for bonds. Yet gold could likely do well if inflation really begins to pick up.

But none of this is likely to change the long-term problems we've discussed. These proposals are likely to cause the government's massive debts to balloon larger... and will do little to fix the troubles in the corporate debt markets Porter has detailed.

In short, Trump may be able to create an economic boom, but he can't delay the reckoning forever.

More important in the near term, it's not yet clear how Trump will be able to do all he has promised...

In recent days, more analysts have begun to question if many of his proposals are actually feasible. As one JPMorgan analyst explained in a note over the weekend (courtesy of ZeroHedge)...

The most significant development over the last several days is the changing narrative around Trump. Whereas initially markets were enthused by the GOP sweep and the ostensibly pro-business implications of the Trump/Ryan fiscal/regulatory agenda, investors are now beginning to filter that platform through the lens of political and mathematical reality.

In other words, it's too soon to be certain how many of Trump's proposals will ever come to fruition. And we expect volatility and uncertainty to increase until more details emerge.

In the meantime, we continue to recommend holding a portfolio that can do well no matter what comes next...

Again, this means using smart asset allocation, buying the right kinds of assets (like high-quality, capital-efficient stocks), and hedging appropriately.

But there's another important consideration that has absolutely nothing to do with what assets you buy... In fact, this one idea can help you make more money – while taking less risk – with the investments you already own.

Of course, as regular readers can probably guess, we're talking about risk-adjusted position sizing. If you're not familiar, this is exactly what it sounds like... Rather than putting the same amount of your portfolio into every position, you put more or less money into each position based on the underlying risk in that particular investment.

But while this idea is relatively simple, putting it into practice can be difficult. It often requires more time (and mathematics) than many investors are comfortable with. But not anymore...

Our friend Dr. Richard Smith, founder and CEO of TradeStops, has automated the entire process. With Richard's software, taking advantage of risk-adjusted position sizing is as quick and easy as pressing a button.

But don't let the simplicity fool you... This one tool can dramatically improve your investment results, even if you change nothing else about your portfolio. Richard says it can help you make $15,000 to $100,000 or more on the exact same stocks you already own.

We realize it sounds too good to be true. But you don't have to take our word for it. Richard recently sat down with several Stansberry Research subscribers to show them exactly how this tool works... and how much more money they could have made using it in their own portfolios.

You may not believe how much money folks like you have been leaving on the table. Click here to see for yourself.

New 52-week highs (as of 12/16/16): Automatic Data Processing (ADP), American Financial (AFG), American Express (AXP), Black Stone Minerals (BSM), BlackRock Floating Rate Income Strategies Fund (FRA), Cedar Fair (FUN), Sysco (SYY), and Travelers (TRV).

The mailbag is overflowing with feedback on Porter's big Friday Digest announcement. What do you think? Let us know at feedback@stansberryresearch.com.

"Porter, you asked for our thoughts regarding Stansberry Portfolio Solutions. The primary thought that comes to my mind today... THANK GOODNESS I AM AN ALLIANCE PARTNER, because this new publication is included in my partnership! As a subscriber to TradeStops, as well, I am looking forward to a very, very profitable 2017!" – Paid-up Stansberry Alliance member Al Bowman

"Hello, I have been waiting for something like this for the last 10 years. Hurrah at last, it's coming." – Paid-up subscriber Michael Wong

"Absolutely brilliant. I had thought of trying to create something like this but it is a difficult proposition. Again, thank you for your insight." – Paid-up Stansberry Alliance member J.H.

"Dear Porter, I'm afraid I have a lot in common with Peter G. [minus the snarky poison pen]. My undoing has been my own, and this week was a wake up call with gold taking a tumble. Upon review, it seems I haven't met a risky gold recommendation I didn't like. All of the money I've spent on [many great] newsletters [and TradeStops] got me feeling a little invincible. If x into this recommendation is good, I have been known to reason that 2x will be better... But this week I allowed myself to reflect on how I need to do a better job with the [tremendous] information available to me.

"Your new service looks like another home run. One stop shopping that couldn't be any easier, with help from another extremely smart individual in Dr. Smith. It seems like the perfect set up, but I may need to take a very long trip without internet access to make it work. Given a compelling story about something new and exciting, the VQ of my portfolio has been known to go up. Thank you for all of your company's hard work. A lot of us really appreciate it." – Paid-up subscriber B.T.

"This Digest hits the nail on the head. All so true in my case. I've been with Stansberry for awhile and not made any money. Not your fault. I could use the portfolio advisory. But will I follow it?!!!! Keep trying." – Paid-up subscriber Phil Michael

"What a great idea! I have a Flex membership and a TradeStops membership (because of your recommendation). Nonetheless, it still takes a great deal of musing and reflecting on your recommendations and the TradeStops evaluations to get to anything like your proposed portfolio solution. As you noted, many of us (your customers) need to be saved from ourselves and this could help hugely." – Paid-up subscriber Carl O.

"Merry Christmas Porter to you and your family, I have been with you since the Pirate [Investor] days and I have to say I am excited as I ever have been about your new proposed portfolio service. You really are putting it all together in one package.

"I have to admit I could have done better through the years with your advice, but I have 'learned' and that is what you always hoped for. I write you tonight from my boat in St. Thomas, which you helped me acquire, soon to be joined by my lovely whom just retired yesterday to join me. She has had a very successful career but hasn't been happy with the results of her professionally managed portfolio. She is constantly asking my advice and I have been loath to help for fear of getting something wrong. Just so you know, she subscribed to your newsletter because of me, but now with your portfolio, I can confidently begin to give her a model portfolio. I've always told her that I would take the exact same position as her, so I had skin in the game. But with your help in the future our retirement will become more comfortable. This new portfolio product is greatly appreciated. Thank you." – Paid-up subscriber Rick F.

"Love the idea of portfolio solutions. Sure will make it much easier than trying to follow all the newsletters." – Paid-up Stansberry Alliance member John

"Hello Porter, all I can say is 'Thank you.' I have been trying to build my own portfolios and it seems I dabble a little too much in the most risky areas. A little bit of guidance from an adult would be appreciated... and I am 50 years old." – Paid-up subscriber Randy

"Hi Porter, I don't know what cosmic power led me to find you in 2005, or what thought process convinced me to take out a loan in 2006 to become an Alliance member... But I am forever grateful that I did (10 years!!). Becoming a lifetime member to Stansberry Venture when it was offered was a no brainer. You and the team have made me an amazing amount of money, and I am now a fairly knowledgeable investor. Looking forward to Portfolio Solutions. By the way, I AM a subscriber that does follow the advice for position sizing, stop losses, etc. to a T. I'm also a TradeStops lifetime member. That kinda makes it too easy. LOL all the way to the bank." – Paid-up Stansberry Alliance member Jake B.

"Porter: As I'm sure you know, for every disgruntled subscriber there probably is underneath a pyramid of 1,000 very grateful subscribers (of which I am one). I started with a Retirement Millionaire subscription about 16 months ago. And with the wonderful experience I had with Doc, I subscribed to your Credit Opportunities and it was equally wonderful. From the day of my first commitment with Doc, it only took me four months to become an Alliance member. And I'm old enough to be cynical and have lost too much investing to be easily sold. But it didn't take me too long with the early success I had to see that you guys knew what you were doing and functioned at a level far above any investment advisory I had listened to in the previous 30 years.

"The Alliance membership is possibly the best investment I have made since investing in my professional education (College and Professional School). The education I received from you guys led me to completely rearrange my investments. And learning about gold and its place in investing, allocation size, volatility and its positives and negatives, bonds, options, stop loss strategies, short selling, etc. has been so empowering and effective for me even at my age (62). I did not realize there were so many 'tools' to make money with and to counteract markets that are moving against you. Oh how I wish I had made this connection 25 years ago. The education alone would be worth what I've paid to be an Alliance member, not to mention all of the well-researched specific recommendations on who/what to buy and at what price.

"Thanks to you I have a much more diversified, solid, and stable portfolio now. I'm up around 20% from where I was when I started listening to you guys. And that 20% gain was while I was shifting and rearranging holdings which sustained two flash crashes and a horrid January 2016. Now that I have holdings with good fundamentals with proper allocation sizing, I'm expecting continued appreciation and even greater gains given all of the tricks and tools you share in the publications.

"Imagine my surprise, when I looked over the list of holdings in the portfolio you revealed in this (12/16) Digest and found that my holdings match it about 90% with very similar position sizes. Of course, I wouldn't have had a clue about most of these companies had it not been for reading all of the wonderful research I get from you guys. I can't thank all of you enough for putting me on solid investment ground. I am twisting the arms of my kids to get well acquainted with your research now while they are in their early earning years. And they are listening! So don't let the malcontents get you down. I am here to tell you that you (and your whole team) are more appreciated than electricity, tax cuts, and flush toilets!" – Paid-up Stansberry Alliance member Randy Travis

Regards,

Justin Brill
Baltimore, Maryland
December 19, 2016