The winners and losers of Trump’s victory
The likely winners
Defence and infrastructure
With his protectionist and domestically-focussed manifesto stance, Trump’s victory could mean more money is pumped into defence and infrastructure.
Angel Agudo, portfolio manager of the Fidelity American Special Situations fund, says the next policy lever to be pulled is likely to be fiscal stimulus, in particular, infrastructure spending.
“After decades of sub-par investment in infrastructure, the US’s out of date infrastructure is clearly acting as friction for GDP growth. In addition, the defence budget has also witnessed cuts in recent years and further meaningful cuts are perhaps unlikely in the context of ongoing global security concerns.”
Agudo adds that in general Republicans are considered to be “pro-defence” and therefore it is no surprise that Trump has voiced his opinion for an increased defence budget.
“Given both Trump and Clinton had agreed on these areas, some of this has already been discounted in the market but there are prominent investment opportunities in both areas,” he says.
For Helal Miah, investment research analyst at The Share Centre, given Trump’s anti-Middle Eastern stance, it is possible these countries will switch to increased orders of military equipment from British companies, which could see London-listed stocks such as BAE and Cobham benefit. On the infrastructure side, he picks concrete and cement firm CRH and equipment hire company Ashtead which have significant exposure to the US.
Whereas healthcare has massively underperformed over the last year owing to the headwinds of the election, a Clinton win could have seen a sell-off in the sector. However with a Trump victory, Ziad Bakri, portfolio manager at T. Rowe Price, said this could prove to be “modestly positive” for the sector.
“Trump’s plan to repeal the Affordable Care Act could end up being ‘modestly positive’ for health care stocks. His overall election is perceived as good for drug stocks.”
Matthew Beesley, head of global equities at Henderson Global Investors, said: “President-elect Donald Trump has vowed to do away with Obamacare; this is clearly negative for large sections of the Healthcare sector, though for the Pharmaceutical sector, the Clinton based pricing overhang will be removed and we should expect stocks to rally accordingly.
Miah echoes this view and picks Hikma, Astrazeneca, and GlaxoSmithKline as benefiting from a Trump win – they’re all up so far today.
Energy and fossil fuels
Richard Robinson, fund manager for the Ashburton Global Energy fund, expects Trump’s win to trigger opportunities in the fossil fuel sector, and energy remains an overweight across the product range.
“What he says and does may be two different things, but he’s an enemy of over-regulation so he’s looking to de-regulate, creating a tailwind to anything inhibited by regulation, such as coal. He’ll take a lighter touch to the role of fracking which should help to reduce costs. Renewables have had regulatory support and while I’m not saying it will fall, we can’t rule out that it will be as safe as it has been,” he says.
Robinson picks Weir Group (which is up 6.13% so far today) as a likely beneficiary as it’s a UK company which has a pressure pump in the US which feeds into fracking.
Adrian Ash, head of research at BullionVault.com. said by 11am, traffic from the US was already 38% ahead of the last three months’ full daily average. “New account registrations globally had reached more than twice Tuesday’s total on the eve of the result.
“Brexit, the US election, Italy’s constitutional referendum – they aren’t the reason for gold’s 25% recovery in 2016. These events just give a focus to the underlying switch in the political, financial and investment backdrop.
“If Trump proves to be the belligerent, high-spending protectionist that America just voted for, the underlying move in world gold prices looks set to keep rising.”
The gold price peaked at $1,332.58 per ounce earlier this morning and for UK investors, gaining exposure to gold-related companies such as Randgold Resources, Polymetal and Fresnillo is a way to play on the theme according to Miah.
The likely losers
Claudia Calich, manager of the M&G Emerging Market Bond fund, says today’s US election result has several implications for emerging markets.
“At a first glance, the outcome is clearly negative, given the potential downside risks from increased trade protectionism, anti-immigration measures, large fiscal expansion and steepening of the US yield curve and uncertainty in terms of foreign policy.
“These risks are already being reflected in asset prices. Since the result, Mexico is one of the largest underperformers due to its deep trade and economic ties to the US. Another region which could suffer is Central America. If Trump goes ahead with all of his proposals during the campaign and manages to overcome the logistical nightmare of having all illegal immigrants deported, remittances from these immigrants will come to an end and that will certainly have an impact on their home countries’ economies.”
Calich adds that in Central America, countries seeing the largest impact would be the smaller ones, such as Guatemala, El Salvador and Honduras, where unauthorised remittances from the US could account for as much as 5.6%, 8% and 13.2% of their respective GDPs, according to M&Gs estimations.
“These countries have a much higher share of remittances vs. GDP and current account receipts because their share of illegal immigrants is higher in comparison to the size of their economies and population,” she says.
The US dollar
In the currency markets the dollar has fallen against the pound and the yen, while the Mexican peso has fallen against the dollar, although there has been some moderation of these trends.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The dollar has proved to be a casualty of a Trump win, so far at least, as markets have slashed forecasts of a US interest rate in December, the chances of which have now been pegged back to fifty-fifty.”
However, for UK investors, the fall in the US dollar will be a positive. Richard Stone, chief executive at The Share Centre, said: “Finally, in the UK it should also be noted that near term weakness in the US Dollar, will reverse some of sterling’s weakness which has helped drive the recovery in UK sterling denominated share prices of FTSE 100 companies with large amounts of overseas earnings. That partial reversal will likely exacerbate slightly the impact of falls in headline UK indices such as the FTSE 100.”