Saxo Markets
Summary: Inspirational stocks that might continue to perform positively relative under a Trump 2.0 administration
The election is over and resulted in a Trump 2.0 scenario. This means that not only did Trump win a resounding victory, but his Republican party took solid control of the Senate and will also control the House of Representatives. US stock markets have reacted strongly to this development with a generally optimistic tone, based on hopes for a fresh round of corporate tax cuts, for some industries to enjoy deregulation and protection from foreign competition via tariffs.
For inspiration as we consider the post-election environment and what a Trump 2.0 administration might look like, we look at sectors that might continue to perform positively relative to the overall market on support from new corporate tax cuts, deregulation and tariff protection.
One prominent risk is that the tax cuts may prove more modest than anticipated if deficit hawks in Congress weigh the risks of adding to the already staggering. Fiscal restraint in general (lower federal spending as Trump has at times touted) might also be a risk to US economic growth, as could the promised Trump tariffs, especially as other nations might respond with their own retaliatory tariffs.
Note: The inspiration lists and watchlists below are not specific recommendations and are compiled based only on market capitalization (company size) as of November 7, 2024, as the only parameter within each category.
Defence
This theme may respond favorably to Trump 2.0 given risks of geopolitical conflicts. Shortlisted companies that have more than 50% of its revenue coming from defence and Top 5 of the watch list sorted by market cap. Read more about Defence theme page here.
Financials
Financials leaped aggressively higher the day after the US election as there is widespread anticipation that a Trump administration favours deregulation, especially on looser capital reserve requirements that allow more leverage and a more lenient attitude on M&A.
Top 6 mega banks:
Top 5 large regional banks:
Energy
Trump has touted a “Drill, baby, drill!” agenda for energy companies, a stance friendly to energy companies looking to expand their upstream (production) efforts to increase production, but also mid-stream (pipelines/transmission) and down-stream (refineries/manufacturing and retail), as regulatory requirements could ease on environmental impacts. As well, any easing of requirements to transition to EV’s would mean higher demand for fossil fuels for more years to come, extending the life-span and therefore value of current capital-intensive production facilities like refineries, etc. Trump’s policies could be a two-edged sword for oil producers if prices drop on supply growing rapidly.
Note that the natural gas situation is rather different from oil because of the difficulties of transporting it overseas, which requires very expensive LNG export terminals, both in terms of the cost to build them and the cost to liquefy the gas at very cold temperatures. President Biden sought to limit US gas exports, and LNG terminals don’t have the capacity to export more, so the first step would be to green-light construction of new LNG terminals. Expanding export capacity could sharply raise domestic gas prices in the US, which are far lower than in most of the rest of the world.
Top 6 oil and oil services companies:
Top 6 US Natural Gas and gas pipeline companies:
Small caps
The election result saw a strong outperformance for US small cap stocks. Investors wanting exposure to small caps can consider ETFs that broadly cover US small caps, whether passive exposure to the most popular Russell 2000 index or the S&P 600 small cap (these two offer very similar performance). Within small caps, about 17% of the Russell 2000 are “industrials” by GICS classification – we list the top five by market cap below. As well, we list the top five regional banks within the index (along the lines of the deregulation theme noted for the banks noted above).
Top 5 Industrials within Russell 2000:
Top 5 banking related financials within Russell 2000:
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Head of Fixed Income Strategy
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Head of Commodity Strategy
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Chief Investment Strategist
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Chief Investment Strategist
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Chief Investment Strategist
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Head of Fixed Income Strategy
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Head of Commodity Strategy