The Republican sweep of U.S. Congress and the White House has been especially well-received by the small-cap space.
While the S&P 500 index of the largest U.S. stocks has increased by a respectable 2.8 per cent since election day, the Russell 2000 small-cap index has shot up by 11.1 per cent over that same time.
Smaller companies typically have a more domestic focus, so their shares tend to be bigger winners when the U.S. economy's prospects improve.
President-elect Donald Trump's pro-business tilt, combined with his isolationist attitude toward trade, have investors increasingly hopeful for domestic growth.
"We believe the best way to position portfolios for an all-Republican Washington is to focus on those investment characteristics poised to benefit most from pro-growth policies," Jonathan Golub, chief U.S. market strategist at RBC Dominion Securities, said in a note.
Mr. Golub provided a list of 40 small-cap U.S. stocks poised to benefit from the next U.S. administration. This follows an earlier report suggesting 40 larger U.S. stocks constituting a "Trumped-up portfolio." Both lists are provided below.
The stock picks were chosen based on five portfolio tilts:
1. Value – Stocks with relatively low price-to-earnings ratios tend to outperform in periods of stronger growth
2. Domestic orientation – These stocks are more insulated from U.S. dollar strength
3. Operating leverage – Economically sensitive businesses with higher fixed costs should benefit from stronger economic growth
4. Taxes – Companies with relatively high effective tax rates could be bigger winners if corporate tax rates are changed
5. High-volatility – These names tend to be less sensitive to rising interest rates