Preliminary results from the U.S. presidential election suggest a potential victory for former President Donald Trump, sparking significant market reactions. As of 10 p.m. ET, Trump held a commanding lead in the Electoral College, although several key races remained too close to call. This unexpected turn of events has sent shockwaves through financial markets, with stock futures surging and Bitcoin reaching record highs. Investors are keenly focused on sectors poised to benefit from a Trump presidency, anticipating policy changes that could reshape the economic landscape.
Key Takeaways: Trump’s Potential Return to Power Shakes Up Markets
- Market Rally: Stock futures soared, with the Dow Jones Industrial Average gaining over 500 points, reflecting investor optimism about a Trump presidency.
- Bitcoin Boom: Bitcoin reached a record high of $75,000, fueled by speculation of more favorable cryptocurrency regulations under a Trump administration.
- Sectoral Winners and Losers: Certain sectors are expected to thrive under Trump’s policies, while others face potential headwinds. Steel, financials, military and defense stocks, and small caps are predicted to be winners while companies with significant foreign sourcing could be negatively impacted.
- Policy Uncertainty: The close election results and uncertain outcomes in key states highlight the ongoing uncertainty and potential for volatility in the markets.
Steel Stocks Soar on Protectionist Hopes
JPMorgan Chase analysts predict that steel stocks will significantly outperform if Trump wins. Their analysis points to a “Trump 2.0 scenario” which involves the “increased use of tariffs on Chinese and European imports.” Analyst Bill Peterson stated: “Steels…in particular should rally on a Trump victory assuming greater protectionism would be bullish for U.S. steel pricing, which is already the most attractive globally due to S232 tariffs and largely domestic footprints.” He further added that “We also see further tariffs benefiting downstream aluminum players.” Stocks expected to benefit include Nucor, Cleveland-Cliffs, Kaiser Aluminum, and MP Materials.
Financials Flourish Under Deregulation
Bank of America views a Trump presidency with a split government as the “best-case scenario for bank stocks.” They cite the expectation of “less regulatory oversight” and the potential for “more mergers and acquisitions” as key drivers. The lower likelihood of tax hikes under a Trump administration is also seen as beneficial. UBS’s Trump victory stock basket is heavily weighted towards financial stocks, highlighting expectations of “relaxed capital regulation“, and projecting that “investment banks would specifically outperform from more mergers and acquisitions.” Goldman Sachs, Citigroup, and Citizens Financial are among their top picks. Strategas highlighted Lazard as a potential winner in the mergers and acquisitions space. Wolfe Research added that “under a Trump win and either GOP controlled Congress or split Congress, we expect the Fins sector to be the biggest sectoral winner by far.”
Personality Trades and the Trump Media Effect
Shares of Trump Media & Technology, the parent company of Trump’s social media platform, have served as a proxy for investors betting on a Trump victory. While the stock experienced significant gains this year (94%), it faltered recently as Vice President Harris gained momentum. Election Day saw a brief surge (up to 15%), but the stock ultimately closed down 1.2% after a trading halt due to volatility. Trading volume reached 147 million shares, substantially higher than its 30-day average of 52.1 million. Other companies potentially linked to Trump’s success include Phunware (developer of Trump’s campaign app) and Rumble (a conservative-leaning video platform), along with Tesla due to Elon Musk’s close relationship with Trump, according to Evercore ISI.
Cryptocurrencies Soar on Trump’s Pro-Crypto Stance
Trump’s publicly declared support for the cryptocurrency industry has fueled speculation of a significant boost for digital assets under a second Trump term. More favorable regulations are anticipated, potentially pushing Bitcoin and other cryptocurrencies to new heights. The possibility of expedited approval for cryptocurrency ETFs further enhances this positive outlook. Trump’s stated goal of making the U.S. the “crypto capital of the planet and the Bitcoin superpower of the world” has resonated strongly within the crypto community. Deutsche Bank analyst Marion Laboure noted in a recent research note that “Trump has taken a firm pro-crypto stance during his 2024 campaign, underpinned by his promise to ‘make Bitcoin great again.’” The surge in Bitcoin prices in the days before the election, reaching a seven-month high, is a testament to this market sentiment. Nic Puckrin, CEO and co-founder of Coin Bureau, observed that “The markets will take their cue based on who wins the White House. Trump is widely seen as pro-crypto although irrespective of who wins, bitcoin is still primed for a pump.”
The Dollar’s Uncertain Future
The dollar’s trajectory is a key focus for investors. Many anticipate dollar strength under a Trump administration due to his protectionist policies, particularly tariffs. Jefferies chief market strategist David Zerzos stated on CNBC that “In times of stress we go to the dollar, at least temporarily, especially if it’s global stress and even if it’s U.S.-led stress. That will be the most liquid and the most transparent messaging to what we are getting markets to do, because that’s where people can put money to work fast.” He also highlighted the dollar-China trade as a proxy trade for a Trump win. However, UBS holds a different view, projecting medium-term dollar depreciation regardless of the election outcome. Solita Marcelli, UBS’s chief investment officer for the Americas, asserts that “Fundamentally we believe a combination of the dollar’s overvaluation, a shrinking yield advantage over other currencies, and the U.S.’s significant twin fiscal and current account deficits is likely to weigh on the currency regardless of the victor.“
Military & Defense Stocks and Small Caps in Focus
Strategas anticipates that military and defense stocks, such as Axon Enterprise, could benefit from a Trump victory, citing his strong focus on immigration enforcement and border security. JPMorgan analyst Seth Seifman acknowledged that “the geopolitical climate supports defense spending, regardless of the outcome.” Trump’s emphasis on deregulation and lower corporate tax rates could boost small-cap stocks, as investors view them as a barometer of his electoral chances. Wolfe Research indicated that a Trump win would be “the biggest catalyst for sustained outperformance for small caps,” driven by his domestic-focused agenda, deregulation, and increased mergers & acquisitions. The iShares Russell 2000 ETF (IWM) experienced a rally in late June following a Trump-Biden debate, reflecting this market sentiment.
Oil and Gas, and the US Retail Landscape
Evercore ISI believes that a second Trump term would favor energy stocks, particularly oil and gas producers. Deregulation and a renewed focus on fossil fuel production could benefit giants like Exxon Mobil and Halliburton. Evercore ISI specifically noted that Halliburton could benefit from “unleashing” its domestic energy capacity and Exxon’s strategy could receive a boost from capital flow towards more traditional energy sources. Finally, on the retail front, while companies heavily reliant on foreign sourcing are facing potential losses due to the possible implementation of proposed tariffs, as stated by Trump himself, businesses sourcing primarily within the U.S., such as Ulta Beauty, could benefit. Evercore ISI notes that “Trump will be positive for US-only retailers (which have higher tax rates vs retailers with int’l exposure). ULTA has no sourcing from China and operates in one of the most resilient discretionary categories.”
