The stocks that will gain and those that will lose: how will Trump’s victory affect the markets?

The victory of Donald Trump immediately caused a positive reaction in the markets. Contrary to the dark predictions for the capital markets in 2016 following his election, which did not materialize, this time the analysts around the world estimated in advance that a Trump victory would lead the markets to adequate increases – andThe prophecy did come true at least in the immediate term.

Financial and energy stocks led the celebration, but not only them. The Dow Jones index jumped 3.6% on Wednesday, its best day in more than two years and close to a percentage point above the gains recorded by the Nasdaq (2.95%). The broad US stock index, the S&P 500 responded with a 2.5% increase and an index The small-cap Russell 2000 jumped nearly 6%. On the other hand, oil prices reacted with sharp drops that reached as much as 3%, but later corrected back and the fear index (VIX) crashed by more than 20% to its lowest level since September (16.3 points).

On the other hand, government bond yields climbed sharply. Those for 10 years reached a level of 4.4%, when the assumption is that Trump’s election could lead to a renewed increase in inflation and therefore to a slowdown in the rate of interest rate cuts by the Fed, which will announce the interest rate today.

The beneficiaries: Gas, oil and finance

Gilad Kaiser, manager of foreign stocks in the investment division of 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 Bank Mizrahi Tefahot, points out that “in a dichotomous way, if the stated policy is implemented, inflation-biased industries and assets can become profitable. Trump is associated with increasing government spending, reducing taxes, fossil energy and imposing or increasing import duties.”

Finances and energy stood out on the rise already on Wednesday, immediately after the announcement of the victory. The analysts estimate that these sectors will continue to benefit during Trump’s second term. The XLF index on the financial sector completed a jump of 6%, with the stocks that lead the gains being the stocks of the major banks: JP Morgan, Bank of America, Citibank, Goldman Sachs, Morgan Stanley and Wells Fargo – which each rose by 8% -13% The share of the ‘buy now and pay later’ Efiram also jumped by almost 10%.

Shmuel Ben Aryeh, director and chief investment officer of the local market at Pioneer Capital Management, explains that “Trump is talking about reducing regulation and easing financial institutions, which should make bank stocks more profitable.” Kaiser of Migdal adds that “the banks will require less equity capital, and there are more options for mergers and acquisitions in the sector.”

Yonatan Yahami, investment manager at Mor Investment House, emphasizes that “a policy of easing regulation and reducing taxes will help the entire economy, and it may encourage the granting of loans to companies and an increase in profits from banking and investment services.”

But not only the big banks are expected to benefit. According to Robert Carmeli, Chief Investment Manager at Four Seasons from the IBI Group: “90% of the banking system (4,500 banks in the US) are considered regional banks and their situation is also expected to improve.”

Another area that managed to respond sharply is, as mentioned, traditional energy (gas and oil). The index on the sector (XLE) recorded a jump of almost 4%, led by shares of Chevron and Exxon Mobil. The sharp increase in the index comes at a time when oil prices actually react with a sharp drop, of close to 2%.

According to Yahami, “Trump is known as a passionate supporter of the domestic oil and gas industries, with policies aimed at reducing regulation and promoting drilling and energy production on US soil to support energy independence. In our estimation, these moves may strengthen the position of companies in the field, and generate momentum for their shares, perhaps even at the expense of the green energy shares.”

Kaiser points out that “Trump’s policy is to increase the supply and the number of drilling. This will give a boost to the drilling service companies.” He estimates that the entire industrial sector will be hired, due to the policy of “returning production to the US and favoring domestic American companies over global ones”.

Carmeli estimates that traditional car stocks (such as Ford and General Motors) will also benefit from the president returning to the White House.

The losers: Green energy and cannabis

And on the other hand, if there is one area about which there is a consensus that is expected to lose from Trump’s election, it is renewable energies. With the news of the results, the shares of the sector crashed and the index lost almost 11%. Trump has already claimed that he will divert funds from the ‘green energy scam’, when he means the financing of renewable energy projects and wants to transfer them to bridge and dam projects. The great power could be felt in shares such as the Israeli Solaredge (minus 22%) and Enphase (-17%) its major competitor, as well as other companies in the sector such as First Solar (-10%), Sunran (-30%) and Sunnova (52%) -). Solaredge, by the way, published weak reports with an equally difficult forecast and lost another 22% in late trading.

“Trump believes that green energy has actually increased electricity rates, and therefore he is calling for the removal of the bans on new oil and gas exploration,” says Daniel Shvika, director of the foreign stocks department at Menorah Mitvahim. green and in favor of traditional energy. Therefore, renewable energy companies may encounter certain development difficulties”.

Another sector that is ‘hijacking’ is the field of cannabis. The MSOS index crashed close to 28%. The industry was seen as likely to benefit from a Harris victory, as its vice-presidential candidate, Tim Waltz, is a well-known supporter of the industry. Tilray’s stock lost 13% of its value.

Shvika concludes that “it will be interesting to see how the foreign relations of the incoming administration will affect the stock markets.”