Key Takeaways
- Trump’s election win sparked the “Trump Bump,” driving the S&P 500 to its 48th all-time high, fueled by expectations of pro-growth policies and a favourable business climate.
- Plans for a 25% tariff on Canadian and Mexican imports may disrupt supply chains, heighten inflation, and violate the U.S.-Mexico-Canada trade agreement.
- Potential beneficiaries include Crypto (looser regulation), Banking (deregulation), Energy (fossil fuels), and Metals & Mining (reduced competition via tariffs).
- Negative implications may be seen for Consumer Discretionary firms (tariff retaliation), Renewables (rollback of green policies), and oil prices (deregulation increasing supply).
Global X is taking a look at a second Donald J. Trump presidency and which parts of the economy – and which sectors – might be affected.
After his Presidential Election win, Trump’s return to the White House set off what market-watchers called the “Trump Bump”, a post-election market rally that included the S&P 500 hitting its 48th all-time high. The enthusiastic response in financial markets seemed to underscore expectations of pro-growth policies and a favourable business environment under a new administration.
Given Trump’s slogan of ‘Make America Great Again’ and upcoming protectionist policies, it may be no surprise that the U.S. small-cap index the Russell 2000 has been a strong performer in the wake of the election result, outperforming a number of North American indices between November and December:
Trump’s economic focal points are corporate tax cuts, trade protectionism, and reducing government regulation. He wants to restore America’s former manufacturing capabilities, which could benefit U.S. small- and mid-cap companies.
TARIFFS
As soon as he takes office on January 20, 2025, Trump says he will impose a 25% tariff on imports from Canada and Mexico until they address the flow of illicit drugs and migrants crossing the U.S. border. Trump’s proposal would likely violate the terms of an existing U.S.-Mexico-Canada Agreement on trade.
Mexico and Canada are America’s two biggest trading partners:
Tariffs act as a de facto tax on imported goods, either raising prices for consumers or squeezing company margins. They aim to boost domestic production and divert demand away from overseas suppliers. However, these measures could also disrupt global supply chains and heighten inflationary pressures.
However, some consider Trump’s proposed tariff threats to be a possible negotiating tactic.
SECTORS WHICH COULD BENEFIT:
- Crypto: Trump’s vocal support for digital assets has already sent cryptocurrencies soaring. Bitcoin has hit new highs of over $108,000 on December 17, 2024. SEC Chair Gary Gensler, a proponent of stricter crypto regulation, is stepping down early next year which may signal a looser regulatory framework for the sector.
- Banking: Trump’s deregulatory stance aligns with the U.S. banking industry’s push to soften Basel III Endgame rules, which require large banks to bolster capital buffers against systemic risks. These rules, set to take effect in mid-2025 for banks with over US$100 billion in assets, have faced resistance from financial institutions seeking more operational flexibility.
- The Energy Industry: Trump’s push for energy independence could boost fossil fuels and drive deregulation across the oil, gas, and mining industries, potentially spurring a wave of new drilling and infrastructure projects—delivering a tailwind for companies tied to traditional energy.
- Metals and Mining: Tariffs could ease competitive pressures for firms in this sector, which often sit higher on the cost curve, while chemicals manufacturers might see similar gains—though soft economic demand in recent quarters may leave customers wary of higher prices, according to research from S&P Global.
POTENTIAL NEGATIVE IMPACTS:
- Consumer Discretionary: companies in this sector may face the largest impact if Trump sticks to his tariff plans and is met with tit-for-tat action in response.
- Renewables: Trump plans to roll back Biden’s green energy plans which included subsidizing makers of electric vehicles, batteries, solar power equipment and other businesses aimed at helping the U.S. decarbonize.
- Oil Prices: given the potential of more crude in the marketplace in the wake of possible oil deregulation, this may result in lower oil prices. Combined with potential trade tariffs which typically slow the global economy, this may drag crude prices down even further.
Related ETFs
QQQX/QQQX.U1 – Global X NASDAQ-100 Index ETF
QQCC – Global X NASDAQ-100 Covered Call ETF
QQQL – Global X Enhanced NASDAQ-100 Index ETF
QQCL – Global X Enhanced NASDAQ-100 Covered Call ETF
RSSX/RSSX.U1 – Global X Russell 2000 Index ETF
RSCC – Global X Russell 2000 Covered Call ETF
USSX/USSX.U1 – Global X S&P 500 Index ETF
USCC/USCC.U1 – Global X S&P 500 Covered Call ETF
USSL – Global X Enhanced S&P 500 Index ETF
USCL – Global X Enhanced S&P 500 Covered Call ETF
1 Trades in U.S. dollars
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Published December 20, 2024.
Categories: Articles, Insights
Topics: Equity Essentials