From energy stocks to the arms industry: the stocks that will benefit from Trump’s victory

As the counting of votes progresses and the estimates are that Trump is on his way back to the White House, the markets are also betting this morning that Donald Trump is the one who will soon enter the White House.

Bitcoin jumps this morning by 10% to a record level of 75.2 thousand dollars. The last record was recorded in March when it crossed the 73 thousand dollar mark, throughout most of the last year it traded in the range of 60-70 thousand dollars.

Trump is considered more friendly to the crypto industry. He stated that he will make America the crypto capital of the world, and promises to establish a “Presidential Crypto Council”. Dogecoin, which is even more associated with a Trump victory, thanks in part to Elon Musk’s support for Trump, is jumping 26% and effectively doubling its value in the past month.

But not only the crypto market, increases are also recorded in futures contracts in Wall Street trading with increases of up to 1.6% in contracts on the three leading indices. The contracts on the index of small shares, the Russell 2000, jump at this hour by 2.6%. On the other hand, there are also increases in the bond yields of the US government, when the assumption is that the election of Trump could lead to a renewed increase in inflation and therefore a slowdown in the rate of interest rate cuts by the Fed.

We note that tomorrow (Thursday) the Fed will make its next interest rate decision. The consensus in the market is that the interest rate will drop another quarter of a percent to the level of 4.5%-4.75%, but the market is already less certain that the Fed will continue to lower the interest rate at each of the following meetings.

Last night, the trading day on Wall Street also closed with a positive trend. The Nasdaq rose 1.4%, the S & P 500 added about 1.2% and the Dow Jones rose 1%.

The winners and losers of Trump’s election

History shows that the identity of the president-elect has no long-term effect on the markets. “Despite the temptation to link the results of the elections to the markets, stocks have performed well under both Republican and Democratic presidents,” says Edward Jones, which manages $2 trillion in assets and has approximately 8 million clients.

And yet, in the short term the capital market tends to react to the elections. According to Morningstar data since the 1984 election, the market actually tends to go down on the day after the election by 0.5%, but on days when it goes up after the election it is expected to go up by more than 1%. However, if you extend the observation period to the level of a month, the market was positive in most years, three months later increases of 3.4% on average were recorded, six months later increases of 5.1% on average were recorded and the increase had already reached 16.4% on average a year after the elections.

Gilad Kaiser, director of foreign stocks in the investment division, Migdal Insurance and Finance, emphasizes that “Trump’s return is good for the American capital market. First and foremost, lowering the corporate tax that is on Trump’s agenda will increase the profitability of companies and help the indices reach new highs.”

Ronan Menachem, Chief Markets Economist at Mizrahi Tefahot Bank, points out that “in a dichotomous way, the implementation of the stated policy – a challenge to the Fed and as it is implemented – inflation-biased industries and assets can turn out to be profitable, but of course all scenarios are based on things said in the Republican platform and on views and attitudes that Trump is identified with. However, their strength, scope and actual implementation depends on a long list of factors, such as the balance of power between the two Houses of Representatives. It is also possible that the actual policy will be different from the declared one, and of course we must not forget that for the next two months a democratic president will still be sitting in the White House.”

Trump Media stock

The immediate winners are those who bet on Trump Media stock. In the last month the stock (which previously lost 75% of its value from May to September) is climbing and is close to completing a jump of 210% since the end of September, and as mentioned also the digital currencies.

The market consensus estimates that a Trump victory will lead to an increase in traditional energy stocks (oil and gas) and that the American arms industry is also expected to grow under a Republican president.

“Trump is associated with increasing government spending, tax cuts, fossil energy and imposing/increasing import tariffs, which will challenge US foreign trade relations. Already today, the United States has a GDP debt ratio of over 120 percent and a budget deficit to GDP ratio higher than 6 percent. These two numbers are 2 times higher than the standards that every developed country strives for over time,” says Menachem.

Kaiser adds that Trump is distinctly positive for sectors such as finance and energy, industry and health: As for the financial sector, he notes that “an easing of regulation is expected. Banks will require less equity compared to the requirements of Iron 3, more options for mergers and acquisitions in the sector.”

As for the energy sector, he notes that “Trump’s policy is to increase the supply and the number of drilling will give a boost to the drilling service companies.” Regarding the industry, he notes that “the return of production to the US and preference for domestic American companies over global companies outside the US. In healthcare under Trump, there will be less government involvement and less pressure on pharmaceutical companies and prices, which will help the big pharmaceutical companies.”

On the other hand, renewable energy stocks are considered a sector that may suffer from Trump’s election. This can be understood as his statements also indicate this. According to Kaiser, “the entire field of green energy may suffer from the lowering of subsidies promoted by the Democrats.”

But in this case, the interest rate is the more significant factor for the sector. This is also the reason why the shares of the sector, such as Anphase and Solaraj, have plunged by tens of percent in the last two years. The high interest rate increased costs and caused consumers to slow down purchases so significantly, which also led to a fall in sales.

As for the consumer sector, Kaiser says that “Harris promoted a plan to benefit the lower class and tax the rich, Trump’s victory and the imposition of tariffs will be bad for the small retail stores such as – dollar stores”.

The field of electric vehicles may experience disappointment since under a democratic administration it was expected to benefit from continued subsidies by a democratic administration – both to the public and grants to manufacturers of gasoline-powered vehicles to help them move to the electric field, and on the other hand it will be more difficult and the cancellation of subsidies under a Republican administration.

However, Menachem from Mizrachi Tefahot qualifies and wonders whether the election results are already priced in the markets: “Finally, since the attitude of Trump and the Republicans towards most issues is known, it is likely that as the market prices Trump’s election, the various consequences, for better or worse, on the various sectors are already priced in, at least partially. Therefore, in terms of balance of risks – chances, there is more chance of overreactions of the market in case and where there are surprises, than implementation of the currently known agenda”.

And what about the dollar?

“The expectation is for a drop in interest rates in the upcoming decision, which will create opposing forces on the dollar exchange rate,” says Jonathan Brand, CEO of Ultra Finance. According to him, “on the one hand, Trump is seen as friendly to businesses, which is a positive sign for the economy and, as a result, for the dollar exchange rate. Along with the strengthening of the dollar against other currencies, we also expect a sharp increase in the value of Bitcoin and other cryptocurrencies. Regarding the ratio of the dollar to the shekel, a weakening of the shekel is expected, both due to the strengthening of the dollar and following the Gallant layoffs and last night’s stormy demonstrations. In the long term, against an expected interest rate cut, it is possible that the dollar exchange rate will weaken in the coming months.”

As for the US bond market, Or Furia, the chairman of Furia Finance, notes that these are “precisely trading at sharp price drops (and increases in yields) which is expected to cloud the stock market, as a result of the increasing attractiveness of the bonds which are an alternative to the stock market.”