The losers include those doing business in Mexico, those exposed to global trade and the renewable energy sector as a whole. The winners include the oil and gas sector, defence stocks and pharmaceuticals. There are plenty more stocks where the impact is far less certain at this stage, but a lot will depend on the new US trade policy and its impact on the global economy.
Here’s our sector-by-sector breakdown:
The pharmaceutical sector:
Pharma stocks were hit during the presidential campaign by Hillary Clinton’s pledge to crack down on ‘unjustified’ price increases on older drugs. That was a response to well-publicised and criticised price hikes by the likes of Mylan for its EpiPen allergy injection, and the price hikes made by Canada’s Valeant and non-listed Turing Pharmaceuticals.
Trump was also critical of high drug prices, but he didn’t make any policy pledge and is expected to be a lot more lenient about drug pricing. He has also pledged to take a knife to regulation in general, which would benefit the drugs companies, and for sure he will follow through on his pledge to repeal Obamacare.
Trump pledged to end years of deadlock over the US defence budget and boost spending on new ships and planes for the US Navy and Air Force. If he manages to achieve this, then the US Defense Department can start long-term planning again, and that’s going to only benefit US defence contractors like Lockheed Martin, Northrop Grumman, Boeing, General Dynamics and Raytheon.
Outside the US, players like BAE Systems (big supplier to the F-35 joint strike fighter program) and Rolls-Royce could benefit, although Trump’s new rhetoric about protecting US jobs definitely favours the domestic companies.
The Oil & Gas sector:
Trump pledged to make the country ‘energy independent’ and says he will open up more federal land for exploration and development and ease regulation. Again, this is going to benefit the local oil and gas explorers rather than having a wider impact, but Trump could also impact the global oil price if he follows through on this threat to rip up the pact that major powers signed with Iran over its nuclear programme.
This deal allowed Iran to ramp up its oil exports, helping send the global oil price down. The president-elect may find it difficult to tear up the deal.
The renewable energy sector:
Trump is not a believer in global climate change, claiming it is a hoax cooked up by China, and has pledged to ‘cancel’ the Paris climate accord. He says wind and solar power are too expensive and take too long to pay back, although he also apparently ‘loves’ solar power.
Clearly a lot of Trump’s campaign rhetoric is just that and much of it will be confined to the campaign, but he was overtly negative about renewable energy and supportive of traditional energy sources suggesting this is one area that will feel the strain. Shares in Danish wind power company Vestas Wind Systems fell 8.5% on the day Trump was elected for a reason. Spain’s Gamesa fell 4.2%.
This is all about Mexico. It’s cheaper to make cars in Mexico than the US, and thanks to trade deals it’s cheaper to export cars to the US from Mexico than from, for example, the EU. Nissan, Honda, Toyota, Mazda and Volkswagen already have plants there and BMW and Daimler’s Mercedes are planning plants.
More surprisingly maybe, Ford, GM and Chrysler also have Mexican plants and Ford’s plan for a new plant attracted Trump’s ire as soon as he launched his presidential campaign back in June of 2015. Trump’s plans for a wall along the Mexican border and for renegotiating or ripping up the North American Free Trade Agreement may not come to pass, but the Mexican model for the car makers is under big threat.