Top Trump Trades Recommended by Wall Street Ahead of the Election
As the political landscape heats up with the upcoming presidential election, Wall Street analysts and investors have been keenly eyeing various stocks and sectors that could thrive should Donald Trump secure a second term. This article outlines the top trades and sectors predicted to benefit from a potential Trump victory, based on insights from leading financial institutions.
Steel Stocks
If Trump regains the presidency, analysts at JPMorgan anticipate a significant rally in steel stocks. Analyst Bill Peterson outlined that a “Trump 2.0 scenario” would likely introduce increased tariffs on imports from countries like China and Europe, particularly focusing on energy deregulation within the first 100 days of his potential presidency. Given these circumstances, U.S. steel prices, already buoyed by existing Section 232 tariffs, would likely benefit further from heightened protectionism.
Related stocks that can outperform in this scenario include Nucor, Cleveland-Cliffs, Kaiser Aluminum, and MP Materials.
Financials
The financial sector stands out as another potential beneficiary under a Trump administration, particularly in a split government scenario. According to Bank of America, the prospect of relaxed regulatory oversight coupled with a reduced likelihood of tax hikes could usher in a favorable environment for bank stocks. The firm also noted that the possibility of heightened merger and acquisition activity would likely boost the financial sector.
Furthermore, UBS included several financials in its Trump victory stock basket, with key picks such as Goldman Sachs, Citigroup, and Citizens Financial. The advisory firm predicts that investment banks would particularly outperform due to this increased M&A activity.
Personality Trades
Trump’s supporters have also leveraged shares in Trump Media & Technology as a proxy for predicting electoral outcomes. The stock, which is linked to Trump’s social media platform, surged 94% this year, although it faced volatility in the weeks leading up to the election. As it peaked on Election Day, the stock ended 1.2% lower after halts for volatility. Other relevant stocks include Phunware, known for Trump’s campaign app, and Rumble, a conservative video platform. Moreover, Tesla is seen as a possible beneficiary due to CEO Elon Musk’s close ties to Trump, as noted by Evercore ISI.
Cryptocurrencies
Should Trump reclaim the presidency, the cryptocurrency sector could also see favorable developments. His pro-crypto stance and promise to establish the U.S. as a “crypto capital” are pivotal to this outlook. Deutsche Bank underscored that favorable regulations could propel digital currencies such as Bitcoin to new heights, with many speculating that Trump could expedite cryptocurrency ETF approvals.
In anticipation of potential gains under a Trump administration, Bitcoin’s value has recently surged to a seven-month high. Analysts speculate that, regardless of the election outcome, the cryptocurrency market is due for a rebound.
The Dollar
Another critical component to watch during the election results is the stance of the U.S. dollar. Market analysts expect a stronger dollar should Trump win, driven primarily by protectionist policies. Jefferies chief strategist David Zerzos noted that in times of stress, the dollar provides a safe haven, strengthening the greenback, particularly against currencies like the Chinese yuan.
However, UBS cautioned that any dollar appreciation in the short term might be short-lived. They highlighted the fundamental challenges facing the dollar, including overvaluation and domestic economic deficits that could lead to medium-term depreciation, regardless of the election’s outcome.
Military & Defense Stocks
The military and defense sector could also benefit from a Trump victory. Strategas suggests that companies like Axon Enterprise may see growth due to Trump’s strong focus on immigration enforcement and defense spending, which remains a contentious issue during his campaign.
Small Caps
Small-cap stocks stand to gain significantly from Trump’s deregulatory approach and tax strategy. Analysts from Wolfe Research noted that a Trump victory would act as a catalyst for sustained outperformance within this sector. They believe that increased mergers and acquisitions would likely provide a boost to small-cap firms.
Oil and Gas
Energy stocks, particularly in the oil and gas sector, have also been identified as potential winners in the event of a Trump presidency. Evercore ISI suggested that Trump’s deregulation and support for fossil fuel production would allow companies like Exxon Mobil and Halliburton to flourish.
U.S.-Only Retailers
Finally, U.S.-only retailers are poised to benefit from Trump’s proposed tariffs on imports. Companies like Ulta Beauty, which do not source from China, may experience a competitive edge under these policies, as international retailers could face increased costs.
In summary, as the election approaches, investors are positioning themselves around several sectors and stocks that could benefit from a Trump victory. The current analysis points to steel stocks, financials, military and defense sectors, and small-cap stocks as top performers in this political scenario.