The odds of former President Donald Trump returning to the White House have risen significantly following the weekend’s attempted assassination. Investors now also anticipate the Federal Reserve will begin cutting interest rates in September.
As a result, we have seen violent rotations in the market this week. Investors have bid up areas that might benefit from a second Trump presidency and dumped areas that may lose.
Trump favors higher tariffs, particularly on imports from China. This could potentially hurt semiconductor stocks such as NVIDIA (NVDA) and Super Micro Computer (SMCI) . His comments on Taiwan have resulted in a broad sell-off in chip stocks today, driving the VanEck Semiconductor ETF (SMH) down almost 7%.
Trump prefers more deregulation, which could benefit the health insurance, energy, and financial industries as well as small-cap companies.
Proposed extensions of corporate and personal tax cuts could increase budget deficits and result in higher government borrowing. Consequently, longer-dated bond yields have surged lately.
The Biden administration’s focus on green energy could take a back seat, and some of the subsidies could be eliminated. Solar and clean energy ETFs have plunged over the past weeks due to these concerns.
Trump’s support for oil companies and more drilling is likely to result in lower energy prices, which may not be positive for the energy sector.
Cryptocurrencies and related stocks have risen sharply in hopes of a more friendly administration. Trump is scheduled to speak at a crypto conference later this month. The iShares Bitcoin Trust: (IBIT) is up over 10% this week.
It remains to be seen whether Tesla (TSLA) CEO Elon Musk’s endorsement of Trump could result in a softening of Trump’s stance toward electric vehicles. Tesla stock has been on a tear lately since the company reported better-than-feared second-quarter deliveries.
If EV purchase-tax credits are eliminated by the new administration, Tesla will still be in a much better position compared to its peers in the industry, according to some analysts.
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— Neena Mishra
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Source: Zacks