The magnitude of Trump’s presidential victory over Democratic incumbent Kamala Harris will endure as one of the most remarkable political comebacks in American history. With his presidency ending in January 2021 due to political scandals, ignoring racial disparities and denying the existence of the Coronavirus, his 312 electoral votes in the 2024 election present Trump’s New Era: Trump 2.0. Although few expected such a decisive victory, global investors are shocked by the surge in stock market prices and cryptocurrencies, such as bitcoin vaulting over $90,000 – a 34% rise since last week’s election date.
Given Trump’s unorthodox style and financial record in stimulating economic growth by shaping markets with bold policies, history suggests that stock markets tend to perform well over the next year. However, given the sea change in the political and economic handling of the US economy, investors expect this new Trump era to be volatile and unpredictable. Yet, it’s recognised that Trump’s core economic philosophy of focusing on low taxes, deregulation and America-first trade policies is highly likely to continue. As a result, I believe there are a few factors investors should consider when “trading Trump”.
Prepare for the “Trump Effect” on Sectors
Trump’s electoral victory is expected to disrupt the status quo, meaning that sectors thriving prior to his win are likely to be left in the shadows, and others are likely to boom. We could see a rise in industries that align with Trump’s brand of nationalism: energy companies, fossil fuel companies, and defence contractors among others. Therefore, investors should be ready for seismic shifts across industries. Investors could consider seeking out prospects in industrial and infrastructure equities, especially those that stand to gain from a renewed focus on American manufacturing and energy independence. Additionally, we expect to see tech companies face scrutiny as Trump holds antitrust views against companies like Google, Amazon, and Meta for monopolistic behaviours and unfair market practices.
Brace for the Return of Tariffs
Trump’s America First strategy does not solely centralise boosting economic production; it also focuses on reshaping global trade in favour of the largest economy, the USA. As a result, expect Trump’s tariff playbook to target primarily China and the rest of the Asian market, but also the EU. If history repeats itself, this tariff war could act as an incentive for manufacturers to increase their domestic production, thus increasing the value of their share price. Where reshoring could assist in reducing tariff concerns, investors may want to follow the steel, autos and consumer goods industries closely.
Volatility is Coming: Be Ready for Whipsaws
Trump has never failed to portray himself as a predominant character on social media platforms; in other words, he has no filter and is opinionated driven. His X (previously known as Twitter) focussed comments and sudden, impulsive policy shifts can send markets into whipsaws – sharp, erratic price movements will become a defining feature of the market. It’s obvious to say that throughout Trump’s era, expect the unexpected. One important aspect of mitigating risk is to hedge against chaos. This includes diversifying stock portfolios, or even so, hedging with Bitcoin. Trump has expressed himself as pro-Bitcoin due to his desire for economic independence through less reliance on foreign currencies and more self-sufficiency in economic dealings. Bitcoin reflects Trump’s interest as it reflects an appreciation for its potential as a store value outside of traditional government-controlled systems. All in all, investors should anticipate economic uncertainty before the rest of the population and be prepared to make strategic moves to position themselves effectively.
Overall, Trump’s electoral victory is not an unprecedented event – it has happened before, and thus, investors can act on foresight. Trading and investing in this “Trump era” requires an understanding of history and psychology. Trump’s economic approach favours an active, responsive strategy. The bottom line is knowing how to be flexible and adaptable – I believe these skills will be the key to success in this new era.
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