Why picking the right stocks to own for a second Trump presidency is tricky

There is a growing sense that he will win the race for the White House, so I got up early on Tuesday to start at what a Trump administration might mean for our portfolio. I started by ranking stocks by their exposure to China because I know that Trump really does not care for China at all, never has. I know this not just from the rhetoric you might be familiar with but also from my early interviews with him when “Mad Money” started and from my time with him as a judge on “The Apprentice.” I had written up, very specifically, what Trump could mean for Nvidia , one of our long-time favorites, which does 14% of its business in China. My concern: What if Trump says he doesn’t want Nvidia chips sold in China because he finds out that lots of our military technology is based on Nvidia gaming semis? It’s the truth. There goes that 14% of Nvidia’s business. Of course, Nvidia can live without China right now because of all the business it has in the rest of the world. But it’s not something you want to see. It doesn’t help the price-to-earnings multiple. Then right when we are in the middle of Tuesday’s “Mad Money” production, it comes over the tape that Trump might want 60% — hey, he might want 100% — tariffs on China imports. That could cause China to retaliate in a way that may hurt Nvidia sales in China anyway regardless of anything Trump does specifically to China and Nvidia’s relationship with the Chinese government. There goes that first draft, I said to myself. But then, just as I am finishing the show, out of the corner of my eye I see on the TV that Trump isn’t sure that he has a duty to protect Taiwan. Holy moly. Nvidia’s chips are made by Taiwan Semiconductor . What does he mean there may be no duty? Who can own a stock of a company where its chips are all made on an island next to China that has implicit protection from the U.S. — protection that may go away if Trump is elected? Okay, now it is real bad and I am mentally ripping up everything I have written and I am beginning to wonder do we have to trade Nvidia, sell a lot of it, perhaps, because it may not be safe to own a stock that is levered to Taiwan. But then, as we stand down and I am back in my office, I read that what Trump is doing is trashing Taiwan, accusing the country of taking all of our semiconductor manufacturing away, and what he is really saying is that unless Taiwan pays for protection from a Chinese invasion he isn’t going to defend them. What will the Chinese think now? What if Taiwan won’t pay? Does he give up the implicit guarantee? It’s hard enough to defend Taiwan but, at least, the Chinese had been intimidated by Trump about not going after Taiwan in his first presidential go-round with China. I understand from very good sources that not long after he took office Trump told the Chinese to keep their hands off of Taiwan — or else. So now, in one 14-hour period, we go from figuring that Trump is willing to defend Taiwan and make sure that Taiwan Semiconductor, which makes the chips from Nvidia, will get protected by Trump if he is elected, just like last time, to where Trump accuses Taiwan of stealing our semiconductor manufacturing so they need to pay for our military protection. Our terrific “Mad Money” staff sees that I am downcast on the way out of the office and Regina Gilgan, our amazing executive producer, who has been with me from the beginning of our 19-year run, wants to know what’s wrong. I lay it all out, and she reminds me that a market hates uncertainty more than just about anything. So I ask you Club members, do you think anything is less certain than the Nvidia-China story I just laid out to you? Don’t you think there could be hundreds of stories just like this when it comes to stocks and the market? We all think that Trump’s so much better for business than Biden. Correct? We all think we know what will happen to stocks under Trump. They go higher. Right? But think about this. I know President Biden from way back during the “Kudlow & Cramer” days in the early 2000s. He used to tell me he was proud that he owned no stocks. He used to revel in the fact that he was the poorest senator out of 100. I know, definitely not a Club member. The one thing that Biden has not done, though, is be unpredictable about issues like semiconductors. He has a very sensible policy, executed by Gina Raimondo, his excellent commerce secretary, that has tried to revive the semiconductor manufacturing industry in this country. He doesn’t want us to be too beholden to Taiwan precisely because China could invade it and we may not be able to stop them. The Chinese government believes Taiwan is their sovereign land. Biden doesn’t want protection money. He doesn’t want to punish those who stole our semi manufacturing because it isn’t true. We simply don’t have enough engineers to build the foundries they have in Taiwan. They are a most reliable friend and a secret behind our semiconductor greatness. In that sense, the market will take Biden’s certainty over Trump’s uncertainty any day of the week. Let’s not forget the stock market has been fabulous under Biden, and consistency, even if it is consistently bad, can be gamed. How am I supposed to game this craziness. I want to be of value to you and Trump makes it pretty darned hard. That’s not the end of the world but what it means is that the political risks under Trump are myriad and they can impact your portfolio aplenty. Whim is a political risk. Trump and Vance could be whim times two. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust is long.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Republican presidential nominee and former U.S. President Donald Trump and Republican vice presidential nominee J.D. Vance embrace on Day 2 of the Republican National Convention (RNC), at the Fiserv Forum in Milwaukee, Wisconsin, U.S., July 16, 2024.

Callaghan O’hare | Reuters

There is a growing sense that he will win the race for the White House, so I got up early on Tuesday to start at what a Trump administration might mean for our portfolio.