Trump's Victory Lifts Small-Caps, Banks
Donald Trump's second term as U.S. President on Wednesday lifted equity markets, on the back of bets on lower corporate taxes, favorable tariffs, and deregulation. This lifted shares of local small-cap companies, banks, and Trump Media.
Elon Musk, the CEO of Tesla Motors, was appointed to head a government efficiency panel after Trump endorsed the billionaire during his election campaign. This led to an increase of 12.6% in Tesla's shares.
Futures linked to the Russell 2000 small-cap index surged by 6%. The Dow and S&P 500 were both set to open on record highs.
The market believes that a Trump presidency would unleash animal spirits, and boost growth in the near-term by reducing corporate taxes and deregulating regulations," said Frederique Carrier, head of RBC Wealth Management's investment strategy in the British Isles & Asia.
Trump Media & Technology Group - in which Trump holds a majority stake - soared by nearly 37%, as investors ignored the latest quarterly results, which showed that the Truth social parent company had a revenue of just $1 million.
His stake, which was worth $5.4 billion at the time of his last purchase, has nearly tripled since its all-time low in late September. Analysts said that the company's stock market value of nearly $9 billion is separate from its daily business.
Trump's Republican Party secured the Senate, and made gains in the House of Representatives. This could make it easier for him to pass his legislative proposals and make key appointments.
The markets "have priced a pretty solid mandate for Republicans and are biased towards most of the Trump Trades", according to Scott Chronert.
"Policy details are important here, as the market seems to place more emphasis on tax cuts, deregulation and a business-friendly background."
Wall Street banks JPMorgan Chase and Bank of America, as well as Goldman Sachs, jumped between 7 and 9% in anticipation of improved domestic investments and looser regulation.
Bitcoin reached a new record high after Trump's victory. He has been positioning himself as a pro-cryptocurrency. The crypto-linked stocks Coinbase MicroStrategy Riot Platforms MARA Holdings all jumped between 10 and 12 percent.
Geo Group and CoreCivic, private prison operators, both saw their shares rise by 20% and 22% respectively as Trump's promise to crackdown on illegal immigration may boost demand for detention facilities.
Other European defense stocks rose in response to Trump's threat of withdrawing from NATO. Trump said he would no longer defend allies who did not increase their defense budgets.
Berenberg analysts stated that a Trump presidency would accelerate European defense spending as demonstrated by his first term from 2017-21.
AUTOS, ENERGY & CHINA
Tesla shares rose on Musk and Trump's proximity. However, other electric carmakers saw their stocks fall after Trump said that he was considering ending the $7,500 tax credits for EV purchases.
Rivian Automotive fell 2.6%, while Nikola fell 1.6%.
Garrett Nelson, CFRA Research's senior equity analyst, said that the elimination or reduction of EV credit will increase Tesla's competitive advantage.
Ford and General Motors, two of the largest automakers in the United States, saw their shares rise by 3.3% and 1.5% respectively.
The oil majors Chevron, Exxon Mobil, and U.S. renewable companies like NextEra Energy, and First Solar, each gained about 2%, but the U.S. renewable companies, such as NextEra Energy, and First Solar, both fell by 6% and 14 %, respectively.
Trump's presidential election campaign outlined an energy policy that aimed to maximize U.S. power and fuel output. This was done in part by tearing down the current administration's main efforts to combat climate change.
China shares listed in the United States were under pressure from fears of escalating Sino-U.S. relations. The iShares MSCI China ETF dropped by nearly 3%.
Import duties are one of Trump's key policies, and they will likely have the greatest global impact. They include a universal 10% tariff on all imports and a 60% duty on imports coming from China.
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(source: Reuters)
