06 November 2024
If you are covering some of the stocks that are likely to be winners or losers from Donald Trump’s election as President of the United States, please find below a comment from Quilter Cheviot’s equity and fund research teams:
Chris Beckett, head of equity research, Quilter Cheviot:
“Future US regulation on nicotine companies, particularly BAT and Altria, will be watched closely. A lack of enforcement against Chinese vaping companies has been hampering their US businesses. BAT is the market leader in this space with the Vuse brand, while Altria purchased NJoy last year to get access to this market. Restricting Chinese imports or holding them to the same standards would be a big positive for BAT and Altria.
“Most of these companies want a national adoption of Louisiana type regulation, where government approval is required prior to selling a vape in order to crack down on cheap imports taking share. Trump taking a more aggressive line on Chinese imports gives the industry a better opportunity to get this.”
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“Lower corporate tax would benefit US corporates in general. The US asset-light operators such as Marriott are major beneficiaries from any reduction in corporate tax, while they are relatively insulated from higher inflation given franchise structure. On the negative side, China is an important market, so increased tariffs could harm prospects there, and any increase in yields would restrict new hotel construction, while a higher dollar has a negative translational impact on overseas earnings.
“A Trump victory will likely be a negative for auto Original Equipment Manufacturers (OEMs) given policy stances on tariffs and around electrification. Tariffs imposed on China and Mexico imports would be a negative for non-localised OEMs, on the hand Tesla should benefit given US cars are assembled in the US. Dismantling policies on green energy would benefit US legacy OEMs and may allow them flexibility in powertrain investments and less mix dilution over the period.
“If tariffs lead to higher prices, this will likely pressure lower income groups and therefore would be a negative for quick service restaurants such as McDonalds and Starbucks. Mass deportation of migrants could squeeze the labour market adding to labour costs and inflation.
“A potential negative for Amazon’s ecommerce business if higher tariffs impact consumer spending, along with potential labour cost pressures in the retail operation. However, Amazon is probably better placed to manage these cost pressures than rest of retail and a potential greater likelihood of actions being taken to offset Temu’s growth will likely be viewed as an offset.”
Maurizio Carulli, energy and materials analyst at Quilter Cheviot:
“The Trump victory should have a short-term benefit for US-based steel companies. The likely introduction of significant tariffs to imported steel would benefit local producers despite the structural headwinds affecting the sector. Both Cleveland-Cliffs and Acerinox - with its large manufacturing base in the US - are likely to benefit from it.”
Jarek Pominkiewicz, industrials analyst at Quilter Cheviot:
“To some extent the impact depends on whether we end up with a clean sweep by the Republicans or with a split Congress scenario.
“In the former, there is increased likelihood of significant policy changes, including the repeal of incentives for renewables and battery production, reduced regulation of oil & gas, as well as intensified/broadened tariff regime.
“The last item, putting aside any possible negative sales impact from retaliatory actions and/or elevated supply chain complexity, would likely increase the cost of goods sold for US manufacturers. This, combined with likely accompanying reshoring/friend-shoring trend to escape the tariffs, would likely benefit automation players, such as Rockwell and Emerson.”
Nick Wood, head of fund research, Quilter Cheviot:
“Small and mid-cap stocks in the US are currently undervalued compared to mega caps. Pre-market indicators suggest that small caps are set to open much stronger than large caps, likely benefiting from Trump’s focus on domestic companies. My preference is for the Artemis US Smaller Companies fund, which has a strong long-term track record due to excellent stock selection and a focus on top-down factors.”
