When Donald Trump became the U.S. president, we saw a rally in several stocks, especially metal and mining names. Analysts termed the price action as “Trump trade” since the companies would benefit from Trump’s policies. There's a new Trump trade in action on Wall Street. SPACs Digital World Acquisition (DWAC) and CF Acquisition Corp VI (CFVI), which are merging with companies popular among conservatives, have seen a buying spree. What’s the 2021 forecast for these stocks? Are they good buys?
It's worth noting that while U.S. steel stocks were at the forefront in Trump trade, the sector sagged under his presidency despite Trump imposing a 25 percent tariff on U.S. steel imports.
Trump trade gave way to “trade war” trade.
Under Trump’s presidency, Trump trade gave way to what can be best described as “trade war” trade. As Trump intensified the trade war with China, there was a downwards price action in several stocks. This includes chipmakers as well as companies like Apple. The iPhone maker sources most of its components from China and the country is also a major market for Apple.
We're in a new kind of "Trump trade" now.
Meanwhile, the price action of some of the stocks tells us that we are in a new kind of Trump trade. DWAC stock has spiked after it announced a merger with Trump’s TMTG (Trump Media and Technology Group). While CFVI’s price action has been relatively muted, it also spiked after announcing a merger with Rumble.
While TMTG is directly linked to Trump, Rumble has also partnered with TMTG. Both of these companies appeal to the conservative audience. Going by the 2020 voting numbers and the swelling crowds at Trump’s rallies, the former U.S. president is still hugely popular among his support base.
Incidentally, Trump underappreciated the massive support and ended up underpricing TMTG in the merger. While it puts Trump’s often boasted “deal-making abilities” under a scanner, it shows a strong appetite for companies with a conservative background. Investors' appetite for the stock hasn't come down, even after reports of an SEC inquiry into the DWAC-TMTG merger.
What's DWAC's stock forecast in 2021?
While some people might think that DWAC is getting overpriced, the company is striking the right chord with investors. The frequent actions that social media companies like Twitter have taken against conservative handles are only fueling a buying spree in names like DWAC.
If anything, Twitter has been even more unforgiving under its new CEO Parag Agrawal. Recently, the microblogging site banned an account tracking the Ghislaine Maxwell trial and another one that tracked Nancy Pelosi's investments. Even though some of Agrawal’s previous comments have been read out of context, they might also go against him and the company as it tries to portray a liberal image.
CFVI stock is popular among conservatives.
The same holds with CFVI, which is taking Rumble public. The YouTube competitor is trying to capitalize on the alleged tyranny of big tech especially when it comes to suppressing conservative voices.
The huge investor appetite for companies like DWAC and CFVI exemplifies the anger among conservative voters. The general perception is that big tech is biased towards liberals and unduly harsh on conservatives.
This online anger and rage are precisely what companies like TMTG and Rumble are trying to harness. While the merger presentations for both of these companies fell short on many key details, the market opportunity for conservative social media companies is massive. If anyone had any doubt, the steep rise in DWAC and CFVI should quell the doubt.