A decisive election outcome electing Donald Trump was not the base case for most pundits. This would be a good time to go through what a Trump presidency possibly means for the markets.

 

Let's keep things simple, potentially…

 

A Trump presidency is good for;

 

• Domestic US companies [mid-cap and small-cap companies could be the biggest benefactors]
• De-regulation [banks, artificial intelligence, autonomous vehicles and US corporate M&A activity could be the biggest benefactors]
• Bitcoin
• US dollar [mostly because a Trump presidency is inflationary which will keep US interest rates higher than expected]

 

 

A Trump presidency is not good for;

 

• Canada [tariffs on Canadian goods make us less competitive than we already are]
• Inflation [it's hard to imagine a world where tariffs do not increase the cost of goods for the American consumer. The bond market has already reacted with higher interest rates]
• Renewables and green initiatives [it appears that subsidies to green initiatives and electric vehicles could be cancelled or reduced]

 

YET TO BE DETERMINED?

 

• Oil and gas. It should be noted that during Trump's last presidency 2016 to 2020, the energy sector was the worst performing sector. However, it is possible that a trump presidency will reinstate the sanctions on Iranian oil production which could significantly affect the price of oil.
• Debt and deficits. Neither candidate talked about trying to balance the budget with little enthusiasm to raise taxes or cut spending. However, if Elon musk runs the Department of government efficiency as stated, he may be able to do what he did at Twitter and cut cost dramatically. Time will tell!  

a few other things to consider

 

Post-election returns have generally been positive [as per chart above]. As I stated in previous Friday notes, the current bull-market is still relatively young by historical standards. Over the last century bull markets on average have gone up 152% over a 50 month period. The current bull-market is 25 months old with a 65% gain. There is no doubt that current trailing earnings at 24 times is not cheap however, expensive stocks typically get more expensive and the prospect of less regulation in the US will likely drive the cycle higher. Put on your seatbelts!

 

 

I have also included a report from our CIBC Economics team entitled “Living up to your potential”.

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan