What Would a Trump Presidency Mean for Markets?

by ETF Base on April 7, 2016

For some, a Trump presidency is a scary outcome to consider, but it may well present opportunities to those who are prepared.  The reality is, it may well happen.  He has gone wildly up and down in the polls over the past few months such that anything is possible.  Here are some scenarios and sectors that should be considered in the event Trump is headed to both the Republican nomination and then the Presidential Election:


Mexico – There’s been a lot of talk about building a massive wall between the US and Mexico border.  And to top it off, Trump claims that Mexico will pay for it.  Until recently, nobody really knew how Billions of dollars in expenses would be extracted from Mexico.  This week, it was revealed that this would be accomplished by essentially demanding a one-time payment of several Billion dollars from Mexico or else the US would cut off the ability for Mexican immigrants to send remittances home to Mexico.  This is a very common practice where people either temporarily or permanently migrate from Mexico to the US and send small weekly or monthly payments to family back home given the much higher wage rates in the US.  While this all sounds like a pro-US move to some, it doesn’t factor in the reality that people that are highly motivated to enter and exit the country will likely find a way to do so (climbing over or burrowing under any wall is not terribly difficult), not to mention, there are hidden benefits to the US economy via the immigrant workforce – lower wages, more labor for jobs many Americans are not interested in doing, etc.  This is a reality many of the anti-immigrant cohort do not give proper credit to.


International Trade in General – Aside from Mexico and to some degree, China, Trump has claimed that he will rewrite all major trade deals to be beneficial to the US.  This is an unlikely outcome, especially since he has already now projected it as a planned strategy pre-election.  The other countries involved can simply say no.  While Trump has made some protectionist claims, like bringing low-skill, low-pay manufacturing jobs back home, it is unlikely this will be widely employed or successful.  This is no different than how some of Obama’s jobs plans failed (solar manufacturing for instance).


Sectors of Interest – Some sectors to keep an eye on given campaign rhetoric are as follows:


  • Pharma – Trump has targeted drug companies for major pricing negotiations and government spending reductions. This is a common target from the left, but never from the right.  Given that the US is where most pharma margins come from, any new candidate has to contend with the prospect of shutting down the primary source of profit for the industry, potentially stalling or killing future innovation.  But the market may react to a Trump win with a downward move in pharma stocks nonetheless.
  • Gun Manufacturers – Any Republican win would likely result in a continued run on gun stocks. While there have been some one-time jumps in stocks when Obama has spoken about gun control and legislation, under a candidate like Trump, we might expect more gun-friendly legislation and less red tape, further bolstering sales.


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