The return of President Donald Trump

06 Nov 2024

By Danish Lim, Senior Investment Analyst for Phillip Nova

It’s about 6pm on 6 November 2024 in Singapore and we see Trump having attained 267 Electoral College votes. He just needs three more to clinch victory. Despite putting on a good fight, Kamala Harris is currently trailing him with just 224 Electoral College votes. It looks like a foregone conclusion that Donald Trump will return as the 47^th President of The United States of America.

The key to Trump’s reappointment would be the victory achieved in key battleground states of Pennsylvania, Georgia and North Carolina. Congratulatory messages for Trump have already begun pouring in from foreign leaders including Australia, France, Ukraine, the United Kingdom, Israel and Australia.

Market Reaction

As the votes in the various states were being tallied, the markets started to react according to a probable Trump return.

The S&P 500 jumped 1.8% and the Russell 2000 has since gained a whopping 6%.
The USD has rose to the highest level since July. Bitcoin rose 6.85% to hit a new all-time high of $75,000. Dogecoin’s surge exceeded 20%.
The Nikkei 225 also gained 2.25%, while the Yen weakened wit the USDJPY nearing 154.
COMEX Copper is down alongside most metals like Silver, Platinum, and Palladium. SGX Iron Ore down over 2%.
Hang Seng slumps by -2.7% while CSI 300 is down by -0.45%.

A Recap on Sectors and Stocks That Could Benefit

Sector ETFs: Financials & Energy under Trump, even Bitcoin/Ethereum-related ETFs due to Trump’s pro-crypto stance
Oil Stocks: Exxon Mobil, Halliburton, Devon Energy, EQT, and Chevron
Healthcare: another heavily regulated sector that may face easier regulation under Trump, Health insurers like UnitedHealth, Humana, and CVS Health.
Banks: Bank of America, Goldman, Citigroup, Wells Fargo, and JPmorgan.
Stocks like Trump Media & Technology Group, Gunmaker Smith & Wesson, prison operator GEO Group, and Conservative video-sharing platform Rumble Inc are expected to benefit from a possible Trump second term.
Defence companies like Lockheed Martin and Raytheon Technologies may also benefit if Donald Trump is re-elected.
Small Caps thanks to lower tax rates and Trump’s protectionist policies.
Crypto stocks and ETFs: Coinbase Global Inc, Marathon Digital, Riot Platforms

Sectors and Stocks That Could Face Headwinds by Trump’s Policies

On the downside, Chinese equities and semiconductors with exposure to China (Marvell, Lam Research, KLA) could see headwinds from a Trump victory due to the potential for additional tariffs on Chinese-made goods and export restrictions.
Other companies exposed to China include Air Products and Chemicals Inc, Celanese Corp, Agilent Technologies, and Jabil Inc
Renewable energy: Invesco Solar ETF, stocks like Nextera, Rivian, and First Solar could fall under Trump
Tariff-sensitive stocks: Lululemon, Gap, and Ulta Beauty could slump if Trump gets elected, with Nike sourcing a chunk of their footwear from China, and Lululemon from Vietnam
EVs: Trump’s claim that he will reverse Biden’s EV policy means EVs like Rivian and Lucid may be under pressure. But Tesla is in a unique position to benefit from both parties, given Musk’s vocal support for Trump
EV charging network operators: ChargePoint, Beam Global, and Blink Charging

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Where the new US Election category is located.

Products available in the new curated category.

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An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

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An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12^th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

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