Image: Canva/Gage Skidmore – Editing: Giovanna Figueredo
In recent months, the term “Trump trade” has been part of the vocabulary of financial market investors. Basically, it refers to assets that benefit from Republican candidate Donald Trump's return to the presidency of the United States.
It is worth noting that the Republican's victory was, for most of the last few months, the base scenario for a large part of the market, which was moving forward to buy assets that could do well in this context.
However, after current President Joe Biden's withdrawal from the electoral race and the first – and probably only – debate between Kamala Harris and Donald Trump, the scenario became more favorable for the Democratic candidate.
The latest polls indicate a small lead for Kamala or a tie. Despite this, the difference between the two candidates is minimal and the election, considered the most difficult to predict in recent decades, remains undefined.
That's why, the “Trump trade” remains a real possibility. In this sense, after addressing which assets should do well with a possible Kamala victory, it is time to understand the “Trump trade” in more detail.
It is worth highlighting that this matter is a warm-up for the free event e online American Elections – The future at stakepromoted by hub financial content Market Makers in partnership with the finance portal Seu Dinheiro.
Between the days October 15th and 17thexperts from different areas (see at the end of this article) will debate the North American elections from different perspectives. To collect your free ticketclick the button below:
What are the assets that benefit if Donald Trump wins?
Macroeconomic analyst Matheus Spiess, from Empiricus, sees the North American stock market doing well regardless of who wins the elections.
“The USA was, is and will continue to be a pro-business and center-right country. It may have one or another more progressive contour, but it won't change the game overnight. Both would be good for the stock market.”
The differences are due to the sectors and cases specific ones that should gain traction.
“If Democrats remain in the White House, the market would also be positive, but along the lines of what we saw during the Biden administration. It would tend to be concentrated in some more specific sectors.”
In the case of Trump, Spiess believes in a movement that resembles the rotation tradeobserved mainly in July this year.
At the time, investors withdrew resources invested in technology companies, which were the big winners in recent years, to allocate in shares of more traditional sectors of the economy – which, in turn, were discounted in relation to the techs.
“I don’t believe that technology will go bad (in a possible Trump administration), but I believe that it tends to ‘underperformar’he said, referring to the term used when a specific stock or sector tends to do worse than a certain benchmark.
Spiess recalls that, unlike the Democrats, who are more linked to green energy, Trump is more associated with traditional energy. “So it would be much more vocal to oil and gas.”
On the issue of manufacturingthe analyst sees the two candidates as similar in their intention to “bring back” the industry to the United States, a movement called reshoring.
“For both manufacturers, it is an interesting thesis, even though with Trump the rhetoric is stronger”, he highlights.
Cryptocurrencies tend to benefit from Trump’s election
Another flag of Donald Trump throughout the campaign has been the cryptocurrencies.
The analyst recalls that Trump, historically “against crypto”, changed his speech to become a “pro-crypto” candidate.
“Kamala Harris has tried to embrace cryptocurrencies in recent weeks, but in a less vocal way. I believe it would be bad for the crypto industry if it continues the same trend (Democrats in power), because Biden and company have been anti-crypto vectors.”
On the other hand, Matheus Spiess highlights that the pharmaceutical industry is a sector that could go wrong in a possible Trump administration.
“Due to the legacy of the fight against the pandemic, rhetoric against the pharmaceutical industry was born”, he recalls.
The analyst also assesses that Trump’s proposals are more inflationary – therefore, calls related to inflation can do well under a republican government.
“This dynamic of cutting taxes and replacing them with import tariffs would be inflationary”, he explains.
Tax cuts even benefit companies and, consequently, the stock market.
On the other hand, the analyst highlights that the two candidates are a “fiscal bomb”. “Neither of them are fiscally responsible. This serious problem in the United States will not be resolved in the next term.”
And in Brazil, how is it?
Matheus does not see a significant impact on the local market if one candidate or another wins.
Due to a possible more inflated North American economy in a possible Trump administration, Spiess highlights that the market could price higher interest rates on longer vertices, which “would reduce the interest differential between the two countries” and “could have a exchange rate impact”. “But it wouldn’t be game changer”, highlights the analyst.
For local investors, there is also not much to do in terms of allocation specifically thinking about taking advantage of the victory of one or another candidate, precisely because of the unpredictability of the result.
However, the analyst remembers that it is possible to reduce possible electoral volatility in the portfolio with classic protections, such as gold and a basket of strong currencies.
Collect your free invitation to Brazil's biggest event on the American elections
O hub of financial content Market Makers will promote between days October 15th and 17th o online event American Elections – The future at stake.
On the occasion, topics such as economic perspectives, geopolitical scenarios that could impact the world, global actions that could favor investors and much more will be discussed.
Check out some of the guests at the event held by Market Makers in partnership with Seu Dinheiro:
- Marcos Troyjo (diplomat and former president of the BRICS Bank);
- Roberto Dumas Ladies (master in Economics and economic scenario consultant);
- Andrew Rider (WHG CIO and global equity specialist);
- João Piccioni (CIO of Empiricus Gestão);
- Lucas Jose (Mynt cryptocurrency expert); and more.
To collect your ticket for free and receive more information about the event, which is 100% online, just click this link or the button below.