Implications of a Donald Trump Presidency
In November 4, 2016, the United States residents went to the polls to elect the 45th president. The race to win the seat has seen two fierce competitors join the race.
Donald Trump carried the Republican flag while Hillary Clinton the Democratic one. The two competitors was unique in their own ways.
Clinton was the first woman to be the presidential candidate of a major party in the country. Donald Trump on the other hand was the first non-political leader to be the contender of a major political party in the country.
In the election, Trump was definitely be the underdog. This is because of a number of reasons.
One, Hillary had the support of the wealthiest people. A piece by Wall Street Journal indicated that Trump raised only $19,000 from top hedge funds while Hillary Clinton raised more than $48 million. Also, traditional Republican donors such as the Koch brothers have ignored Trump.
The network headed by the Koch brothers who spent $400 million in the 2012 election have vowed not to support Trump which is a major blow to the Republican candidate. Trump was also an underdog because he had never held any public office (He is a self-made billionaire who has spent his life building the Donald Trump Organization).
However, polls showed that Trump had the opportunity to win the race, which really happened in the end. Here are the five key industries to trade with a Trump presidency.
#1 – Defense
We followed Trump’s campaign for a while and one of his key selling point was that of being the law and order president. He has vowed to fight ISIS and win it. He has also vowed to support the second amendment that allows residents to own guns.
Trump has also been critical about the current immigration rules and vowed to ban people from select regions from entering the United States. He has also claimed that the police and the armed forces are ill-equipped to deal with crime. Some of the companies to look at are: Lockheed Martin (LMT), Raytheon (RTN), and Northrop Grumman Corporation (NOC).
#2 – Infrastructure
One of the Donald Trump’s selling point was on the wall separating United States and Mexico. He promised to build a wall between the two countries to reduce the influx of Mexican migrants in the country.
Trump has also compared the American infrastructure to that of a third world country.
He claimed that the country’s airports and highways have become a shame to the country. Therefore, a number of companies will stand a chance to benefit in this.
Some of them are: Cemex (CX), LafargeHolcim, AECOM (ACM), General Electric (GE), and Emerson Electric (EMR).
#3 – AECOM – Oil and Gas
Donald Trump has argued that global warming and climate change are not factual. In the Obama’s presidency, the theme of climate change has been vocal. Obama has invested billions of dollars to renewable energy. He even rejected the Keystone Pipeline project which promised to deliver 800,000 barrel of oil per day across 6 states.
Under Trump, such project had not be rejected. Obama has also been on the record for opposing fracking and new technologies dealing with oil mining. In addition, Donald Trump advocated for United States control of oil in war torn countries such as Libya.
Therefore, this will be an added advantage to the oil and gas companies such as Exxon Mobil, Pioneer Resources, and Baker Hughes.
#4 – Insurance
Obamacare has been a posterchild of Obama’s presidency. The goal of this plan was to provide poor uninsured Americans a chance to get insurance cover. This was achieved by introducing taxes to the rich people.
However, to many people, the new plan has not been good to them and to the insurance companies. Insurance companies such as Metlife have threatened to pull out of Obamacare.
Donald Trump vowed to repeal the policy and replace it with something better.
#5 – The Indices
Before the election, the perception among the so called experts was that a Trump presidency win will lead to a recession. After the election, the stock market fell briefly before surging to new highs since then. The main indices in the United States are now trading in their highs.
This has been contributed by a number of things.
One, investors have taken time to assess the policies to be introduced by Trump. They have seen them viable for the market. For instance, Trump has promised to reduce the corporate tax from the current 35% to a 15%.
This will make the US to be one of the lowest taxed countries which is a positive for the companies.
He has also promised to repeal regulations that have curtailed growth in the United States. This is also a positive to the companies. If he keeps his promises, this means that the indices will keep on going up because of the health of the companies.
#6 – Financials
The financial sector is one of the biggest gainer under Trump’s administration. Following the financial crisis of 2008, the Obama administration put in place stringent measures to prevent another financial crisis. The Dodd-Frank regulations have had huge consequences to the American banking sector. It has also made it difficult for banks to lend.
Trump promised to ease these regulations. As a result, this is one sector you should look at.
#7 – Emerging Markets
During the campaigns, Trump presidency promised to renegotiate trade deals. He also promised not to sign the Trans-Pacific Partnership (TPP). He has adopted a nationalistic approach.
This will have significant impacts to the emerging markets (how to trade on them). Many emerging countries such as Mexico have gained a lot from the NAFTA agreement. A repeal of these agreements will have significant impacts to these countries.
Therefore, it is a good recommendation to either stay invested in these countries. Alternatively, you can trade the countries on a day-to-day basis.
#8 – The Dollar
As the economy grows as a result of an improved business environment, we anticipated the dollar to remain steady. The dollar had continue to rise against major currencies such as the Mexican Peso and other emerging market currencies.
Therefore, if you are a long term trader, buying the dollar and shorting gold will do you very well.