Donald Trump’s victory in the US presidential election reverberated across global stock markets, as investors raced to back the winners and sell the expected losers from his win.
In the initial 24 hours after the election the S&P 500 ended up 2.5 per cent, while the technology-heavy Nasdaq 100 climbed about 2.7 per cent and the Russell 2000 small-cap index advanced about 5.8 per cent.
Stock markets gave a positive reaction expecting an ‘America first’ lower individual and corporate tax post-election environment.
Bond yields (think interest rates) rose on the belief that Trump’s expansionary policy could will be inflationary.
The US Dollar rose strongly, as the biggest driver of a currency’s strength in the short-term, is the prospects for interest rates in that country.
But looking a bit deeper who are the stock market winners and losers from Trump’s victory.
WINNERS
Tesla Shares in Tesla, whose chief executive Elon Musk became one of Trump’s most vociferous backers, surged nearly 15 per cent on the news. That boosted the net worth of Musk, the world’s richest man, by roughly $15bn. Musk, who contributed more than $100mn to the pro-Republican America Pac, has been promised a role as head of a department of government efficiency in a second Trump administration.
Banks
US bank stocks jumped as investors bet interest rates would stay higher for longer under Trump and his administration would pursue a light-touch approach to regulation The KBW Nasdaq Bank index rose 10.7 per cent to reach its highest level since early 2022. JPMorgan, Bank of America, and Citigroup closed up 11.7 per cent, 8.4 per cent and 8.5 per cent, respectively. Shares in Goldman Sachs and Morgan Stanley advanced more than 11 per cent.
Private Equity
Apollo Global and KKR shares led gains for private equity groups, climbing more than 10 per cent, as investors anticipated they would be winners from any pick-up in dealmaking. Blackstone advanced nearly 5 per cent. A slowdown in mergers and acquisitions has been a drag on profits for the buyout industry, hitting lucrative performance fees and making it harder for firms to sell their portfolio companies. Expectations that a Trump administration would introduce a more lenient regulatory regime may also help the industry in its push to sell their funds to individual investors.
Oil and Gas Companies
Trump courted oil companies during his campaign, vowing to rip up much of President Joe Biden’s environmental and climate agenda and imploring the industry to “drill, baby, drill”. ExxonMobil, the biggest oil major, climbed about 2 per cent, and rival Chevron was up 2.8 per cent despite a stronger dollar hurting oil prices. NextDecade, a developer of LNG export terminals, rose more than 15 per cent.
Mortgage Groups
Shares in government-backed housing agencies Fannie Mae and Freddie Mac soared more than 37 per cent as investors bet Trump could push for a full privatisation of the two groups that purchase the majority of mortgages issued by banks in the US.
LOSERS
Renewables
By contrast, renewable energy companies in Europe slumped amid fears Trump could abolish the tax breaks and subsidies provided by Biden’s administration.
Tariff-Exposed Sectors
The prospect of Trump imposing new tariffs hit shares of European carmakers. Trump has said he will introduce steep levies on imports, with a plan to impose tariffs for goods at 20 per cent for Europe and 60 per cent for China. The broad-based Stoxx 600 autos and parts index fell 2 per cent, with the threat of tariffs on imported cars, including from Mexico and the EU, weighing on German groups such as BMW and Volkswagen, which were down more than 8 per cent and 5 per cent, respectively, before rallying slightly. The world’s biggest shipping companies were also under pressure, with Denmark’s AP Møller-Maersk down almost 8 per cent and Germany’s Hapag-Lloyd off nearly 9 per cent. Fears that a full-blown trade war between the US and China would reduce demand for shipping drove the sell-off.
Real Estate
US real estate investment trusts were among those hit hardest in Wednesday’s trading as the interest rate-sensitive sector missed out on the broader rally in equities.
The real estate sector of the S&P 500 dropped about 2.7 per cent overall on Wednesday. Companies connected to real estate also struggled, such as tool manufacturer Stanley Black & Decker, which fell about 4.8 per cent.
Time will tell how much Trump follows through on his campaign promises. It is likely we are entering an increased period of global market volatility.
