Trump is Back Baby!
Positioning Trades for a Trump Victory
OK, so he hasn’t won yet.
And let’s face it, at least half of you aren’t super pumped about the idea of him winning.
But as the election looms closer, it’s beginning to feel like Trump is gearing up to reclaim power in the land of guns, fast food and Hollywood.
Instead of debating whether Trump is the coolest dude since Jesus or the reincarnation of Hitler, let’s focus on what a Trump victory could mean for the financial markets and how you can position yourself to profit.
The Promise
Trump is back, presenting a policy agenda rooted in an “America First” philosophy, featuring his signature blend of economic protectionism, law and order, and tough foreign policy.
Here are several key policy agenda points that set him apart from the status quo:
Greater Immigration Control: Trump aims to tighten immigration by halting illegal crossings at the southern border and deporting those with criminal histories. However, he remains vague on the status of the broader undocumented population.
Revive Manufacturing: He proposes bringing manufacturing back to the U.S. through hefty tariffs and cutting the corporate tax rate to 15% for domestic production.
Reducing Regulations: Trump plans to cut red tape and waste. He has proposed a Government Efficiency Commission, potentially headed by Elon Musk.
Foreign Policy Focus: He intends to disentangle the U.S. from global conflicts and bring an end to the war in Ukraine.
Boosting Domestic Energy: Increasing U.S. oil and gas production is also on the agenda.
In short, Trump’s running on a platform of control at home, toughness abroad, and a push to make America self-reliant and secure from within.
What it All Could Mean
Trump’s agenda represents a significant shift in many areas.
In particular, a sudden escalation in global tariffs could have many flow on effects. Coupled with reduced corporate taxes, it could be great news for local manufacturers who primarily supply the domestic market.
Think of industries like construction, materials, automotive manufacturing, utilities and locally focused consumer brands.
Companies to watch are:
Vulcan Materials (NYSE:VMC)
Masco Corporation (NYSE:MAS)
Tesla (NASDAQ:TSLA)
Thor Industries (NYSE:THO)
Kraft Heinz (NASDAQ:KHC)
Campbell Soup (NASDAQ:CPB)
Lockheed Martin (NYSE:LMT)
Duke Energy (NYSE:DUK)
Caterpillar (NYSE:CAT)
John Deere (NYSE:DE)
A broad based reduction in corporate taxes would likely lead to a general lift to the share market as companies are able to keep more of their profits, meaning greater earnings after tax, but also a big boost to economic activity.
However, the whole idea is a massive gamble for American based exporters. If other countries, especially China, retaliate with similar tariffs, American made goods could lose whole international markets. Non-essential products like luxury goods would be especially vulnerable.
The policy could also be massively disruptive to American companies with overseas manufacturing plants, particularly those who export their products back to the US.
Companies to watch include:
Apple (NASDAQ:AAPL)
Qualcom (NASDAQ:QCOM)
Nvidia (NASDAQ:NVDA)
Intel (NASDAQ:INTC)
Tapestry (NYSE:TPR)
Boeing (NYSE:BA)
Exxon Mobil (NYSE:XOM)
Chevron (NYSE:CVX)
If we look closer to home, it’s hard to see any players that are obviously impacted. But let’s name a few to think about.
If Trump can actually pull a rabbit out of a hat and end wars before he’s even in office, that could be bad for defence suppliers.
On the ASX, a couple of notables, include:
Electro Optic Systems (ASX:EOS)
Droneshield (ASX:DRO)
If a tariff war is the name of the game, then China will certainly be the main opponent. There’s potential for a massive slowing in trade between the US in China, particularly in certain products.
China is the biggest producer of Rare Earth Elements. A trade war could be great news for companies like Lynas Rare Earths (ASX:LYC), where there is limited supply outside of China.
What’s the Alternative
There’s only one other viable option in town, and that’s Kamala Harris.
While you might be thinking of her as a continuation of the Biden presidency, that’s far from a sure bet.
She’s been running on a platform of something like hope and change. In fact, she’s running with the slogans of ‘A New Way Forward’ and ‘An Opportunity Economy’. ‘A New Way Forward’ certainly doesn’t mean a shift to the right, since Biden is already fairly establishment centrist. That really only leaves room for her to shift things to the left.
This is backed up by her previous statements of support for things like Bernie Sanders’ Medicare For All bill, Defund the Police, looser immigration, more action on climate change, greater access to abortion and justice system reform.
It can certainly be argued that she’s moved further centre in her speech since running for president. The tricky part is separating out campaign strategy from actual core policy.
So let’s look at her stated platform going into the election.
Tax reform. Lowering taxes for the working class, including additional support for families with young children. A lot of the Harris platform will be funded by higher taxes on the wealthy and corporations, however the promise is that no one earning less than $400k per year will pay any more tax.
Pushing down prices on consumer goods such as groceries, healthcare, prescription medicines and energy prices through a combination of limits on free market price increases, subsidies for new business that create competition, limiting mergers and acquisitions in specific industries and offering consumers greater government assistance. Notable policies are a $2000 yearly cap on out of pocket drug expenses and expanding public healthcare coverage to more people.
Tax incentives, government programs and other initiatives to increase the supply of affordable housing, and restrictions on corporations from profiting on real estate transactions and restrictions on rent increases.
The Harris platform is based on a broad-based transfer of wealth from the haves to the have nots, as well as greater government regulation on how businesses price their products.
Good or bad, it’s certainly a big step to the left, at least on paper. But she might be aiming further left than she lets on, if her previous stances on many issues are reignited after winning the popular vote.
A Harris win could be bad news for the pharmaceutical industry at large, as well as domestic grocery chains and suppliers of other essential items.
With a big agenda of taxing the rich and corporations, we’d expect a Harris victory to lead to a depressed environment for the share market, and a potential retreat to bonds and gold.
Closing Thoughts
The policy agenda’s of Trump and Harris are almost polar opposite on many issues. It’s easy to see in gulf between their two agendas just how populist and extreme politics is in the US right now.
On top of positioning for particular policy outcomes, keep in mind that there is currently a heightened chance of civil unrest around the election. That could mean demonstrations, fighting, further assassination attempts and even attempted coups.
While we don’t want to unnecessarily stoke the flames of division, it’s worth keeping these potential scenario’s in mind. Temperatures are running hot!
No matter who you want to win this election, if in fact you care at all, it’s important to look at both possibilities objectively as to what they mean for your investments.
Put the emotions aside.
Right now, the best indication of a Trump victory is the betting odds. Polymarket has Trump with a 57.6% chance of victory. But the election is still a few days away, and the odds are closing fast.
Presidential Election Winner Odds (Source: Polymarket)
Whichever way the result swings, you can position your portfolio to win big if you put in enough thought and craftiness.
Good luck!