As the US presidential election looms later this year, investors are searching for ‘Trump stocks’ – stocks that will do well if the 45th President of the USA makes a return to the White House.
Investors ponder the question of which stocks will do well post-election every four years, although this time it is easier than usual. This is because it is all but certain who the Republican and Democrat nominees will be even more than 9 months out. And also because there’ll be a lot less need for guessing, for we’ve seen which stocks will do well under both Presidents. So it is not unreasonable to take a stab at which stocks might do well under a Trump presidency.
Trump stocks: Stocks that could do well if Trump wins
We all heard the phase ‘America First’ so many times around during the previous Trump presidency. It is not unreasonable to suspect it would be any different the second time around.
1. Critical Minerals stocks
The US will be keen to secure its own supply chain of critical minerals. We see battery metals and uranium as two particular commodities that will benefit. Uranium prices are at their highest level since the GFC due to its role in decarbonisation and consequential growing demand. As a result, plenty of companies with mothballed projects are restarting them, and companies with projects in the US will do well. We see Peninsula Energy (ASX:PEN) as one such company that could benefit, its Lance project is one of the largest US uranium projects with 53.7Mlb of JORC Resources. There are plenty of battery metals stocks that could benefit too, particularly those with supply deals with automakers including Piedmont (ASX:PLL) and Sayona (ASX:SYA).
2. Industrial stocks with an American centric supply chain
There’s plenty of Wall St companies with American centric supply chains and are not only local market leaders but global leaders. We’ve looked at quite a few such companies in the last year, including Sherwin-Williams and Gorman-Rupp. Companies like these could get significant incentives, including tax breaks, to ramp up with production and sales efforts and potentially bring supply chains and manufacturing back onshore if ever offshored.
3. Semiconductor stocks
This one is up for debate. We think that if Trump wins, the chances of China trying to invade Taiwan will be far lower. As we noted earlier this month, a Taiwan invasion would wreak havoc on the semiconductor sector because it would cut off a huge part of the world’s supply chain, particularly TSMC, one of the world’s largest semiconductor companies. Either way, the administration will also seek to help local firms though tax breaks as well, and this will help competition in the sector.
Which stocks may not do well?
One suggestion of ours is Gold stocks. This is because gold is seen as a safe-haven from inflation, and there is less of a need for safe havens from inflation when it is low (or at least outpacing wages as they did for much of Trump’s last presidency). And obviously, stocks with a Chinese-centric supply chain that are exporting to America, given the ‘America First’ mantra and what it will mean for US trade policy (if the last administration is any guide).
Could it be a boom for all stocks?
Yes, it could well be. We acknowledge, stocks could boom under a second Biden term just as easily as if it were a Trump presidency. At the same time, no matter what administration is in charge, good companies with strong management teams that can make the right decisions will do well and be recognised by investors accordingly.
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