Donald Trump will return to the White House after winning a fiercely fought election against Democrat vice-president Kamala Harris, leaving investors looking for parts of the market that will benefit under the new Republican administration.
The immediate market reaction once it became clear that Trump had won the presidential election was a rise in the dollar and bond yields but investors will also be looking at the long-term implications of the result.
Analysts at Saxo Bank noted that elections can be followed by “considerable volatility and new trends” so investors will have to decide whether or how they adjust their investment strategy now Trump has won the race to the White House.
“The 2024 US presidential election stands out due to its unique circumstances: the assassination attempt on Donald Trump, Joe Biden stepping down, Kamala Harris’ quick takeover to name a few,” they said.
“Historically, the connection between election outcomes and markets has been inconsistent, but these dynamics add uncertainty that could translate into the markets.”
For a comprehensive overview of what a Trump presidency might mean for markets, take a look at this very detailed article by Mirabaud senior investment specialist John Plassard.
Saxo’s analysts added that there are three broad strategies investors can take from here: keep calm and carry on (investors with a well-diversified portfolio and a long-term investment horizon are likely to just stick to their strategy); prepare for volatility (investors with one or a few stocks in their portfolio should diversify to mitigate risks); or seek election-driven opportunities (adventurous investors could look for assets that could benefit from a Trump administration).
Justin Onuekwusi, chief investment officer at St. James’s Place, noted that the 2024 presidential election will have consequences beyond November – with the run-up to January’s inauguration and the first 100 days of the new administration being crucial milestones.
“Investors will closely monitor policy shifts, as the first 100 days will be critical in shaping the market landscape and setting the tone for economic growth, inflation management, and sector performance for the coming years,” he continued.
“Markets will react swiftly to the policy direction set during this period.”
Onuekwusi said a Trump-led administration is expected to focus on deregulation, higher tariffs on foreign goods, tax cuts and policies favouring traditional energy sectors, potentially boosting short-term market confidence but raising concerns over geopolitical stability and fiscal discipline.
This contrasts with what might have come with a Harris presidency: a prioritisation of social inclusion, climate action and economic equity, which could have boosted sectors like green energy but might have increased regulation on fossil fuel and technology companies.
For those seeking to tweak portfolios for a Trump presidency, AJ Bell investment analyst Dan Coatsworth highlighted defence contractors, oil & gas producers and cryptocurrencies as the key assets to watch.
“His previous term as president is associated with a strong run for the stock market whereas Biden – and therefore Harris by default – was clouded by a period of high inflation and high interest rates,” he said.
“That put Trump at an advantage in the current election campaign as the cost-of-living crisis has been difficult for the general public and they’re looking for someone to find solutions."
“[But] Trump may not be the solution to a high cost-of-living as his policies are likely to drive up inflation. He wants to impose big tariffs on imported goods (60% from China, up to 20% on the rest of the world) which would significantly push up prices as the extra costs are passed onto the customer.”
Coatsworth said a trade war is the biggest risk to markets under another Trump presidency, as heavy tariffs on imported goods would upset countries that have historically profited from selling into the US. His tendency to provoke foreign leaders with his comments is another problem for markets.
That said, Trump’s desire to cut corporation tax from 21% to 15% for companies that make their products in the US will appeal to many business leaders.
Coatsworth continued: “Trump is expected to strengthen America’s defences which creates more opportunities for defence companies.”
He highlighted VanEck Defense UCITS ETF, which has 64% of its portfolio in US-listed defence stocks. These include American government contractor Booz Allen Hamilton, data insights provider Palantir Technologies and defence, aviation, information technology and biomedical research company Leidos, all of which have contracts with the US military.
“A Trump election victory could also create a tailwind for domestic fossil fuel producers in an effort to fortify America’s energy security,” Coatsworth said.
The iShares Oil & Gas Exploration & Production UCITS ETF is one option suggested by the AJ Bell investment analyst as it has two-thirds of its assets in US-listed businesses, including EOG Resources – one of America’s key oil & gas players.
Finally, Coatsworth said cryptocurrencies could be among the biggest winners now Trump is returning to the White House, as he has pledged to make the US “the crypto capital of the planet” and to build a strategic reserve of bitcoin.