What does President Trump mean for British investors? How to Profit from the Trump Trade

Donald Trump’s victory in the US elections is expected to boost defense and oil and gas stocks and boost cryptocurrencies.

The FTSE 100 jumped as news of its impending victory in the hard-fought race broke this morning, while the dollar soared and bitcoin hit a new all-time high.

Because the US stock market makes up more than 60 percent of the global market, all investors are exposed to it in some way, making it of great importance to portfolios.

The superpower controls or has major influence over interest rates around the world, international trade via tariffs, corporate taxes on the largest global corporations, and geopolitics (which means, bluntly, whether we are at war or not).

Meanwhile, the president-elect even has a market strategy named after him: the Trump Trade.

We round up the immediate reactions to the election results from money experts, and what the shift in economic and political direction of the next US administration will mean for investors.

What will the US election result mean for the financial markets?

“With Trump’s victory assured, bond yields have risen, as has the dollar, while equities have also responded positively in the US,” said Isabel Albarran, investment officer at Close Brothers Asset Management.

She believes the market reaction will be more favorable than a Kamala Harris win, and while this may reignite inflation fears, the near-term economic outlook remains positive.

“If Trump delivers on his pre-election rhetoric, we expect his term in office to be more inflationary in the long run than that of a Harris administration, with tariff plans, tighter immigration controls and tax cuts all being potential sources of inflationary pressure.

‘Outside the US, today’s outcome is likely to impact international trade, especially with Europe and Mexico, with the Mexican peso likely to suffer.

“China will remain in the line of fire, although this has become a bipartisan issue with the Biden administration continuing Trump’s aggressive posture.”

Albarran expects the Federal Reserve to go ahead with an expected quarter-point cut in US interest rates tomorrow, but says the pace of further easing may be more moderate.

“Ultimately, we do not expect today’s outcome to jeopardize U.S. economic performance. With the economy still needing to digest more than $1 trillion in budget support and regulations on track to ease, growth has some safety nets.

“Additionally, the economy and stock market tend to do well in the first year of a presidency, meaning 2025 should be a good year for the US.”

Justin Onuekwusi, chief investment officer of St. James’s Place, said: “Looking at Trump’s campaign promises, as well as his actions during his last presidency in 2017, we expect his presidency will lead to reduced regulation across the board.

‘In addition, he is expected to focus on immigration and greater use of tariffs in international trade. How this will play out and be received by the markets remains uncertain.”

Onuekwusi says there is potential for greater near-term volatility in bond markets, especially around US Treasuries, as sentiment adjusts to the outcome.

‘Possible higher inflation could also cause interest rates on long-term bonds to rise higher than on short-term bonds. This is sometimes seen as a signal of the start of a strong economic period, but could also indicate a time of higher interest rates.”

On equities, he says sectors linked to international trade, such as technology and consumer goods, could experience more volatility.

“On the other hand, his emphasis on deregulation and corporate tax cuts could provide a short-term boost to sectors such as traditional energy, finance and defense.”

Onuekwusi added: “Smaller companies in the US could be hit harder by post-election volatility, but we think this is a near-term concern.

“We believe global small cap valuations are currently strong and we expect US small caps to perform well over the medium term.”

Blair Couper, investment director at Abrdn, said: “A Trump victory will likely mean a laxer regulatory environment, escalating trade tariffs and possible attempts to repeal parts of the Inflation Reduction Act (IRA).

“Markets had already priced in the likelihood of a Trump victory, but it looks like Republicans will capture Congress, making it easier for the party to implement their policy agenda.”

He says sectors that could come under pressure are those more likely to be subject to tariff increases, and areas of the IRA that are easier to withdraw, such as European carmakers, electric vehicles and offshore wind.

“The stock prices of US companies with supply chains in China are also likely to react negatively, while domestic manufacturing and US small and medium-sized businesses are likely to outperform.

“With President Trump at the helm, America also faces increased inflation risks from these policies, so we are likely to see interest rate-sensitive sectors react and the dollar strengthen.”

Couper notes that banks could perform well if rates stay higher for longer, while real estate and growth stocks would likely be negatively affected. would be offset by the positive view on markets in general from Trump’s policies.

Donald Trump’s victory: sectors that can benefit from it

Defense

“Trump is expected to strengthen U.S. defense, creating more opportunities for defense companies,” said Dan Coatsworth, investment analyst at AJ Bell. he tips:

VanEck Defense ETF (Ongoing costs: 0.55 percent)

“It has 64 percent of assets in relevant US listed names. The portfolio includes U.S. government and military contractor Booz Allen Hamilton, an intelligence specialist; Palantir Technologies that helps the US military with data insights; and Leidos, which supports homeland security and is active in research and development of weapons systems.’

Oil and gas

“A Trump election victory could also provide a boost to domestic fossil fuel producers in an effort to strengthen U.S. energy security,” Coatsworth said. He tips:

iShares oil and gas exploration and production (Ongoing costs: 0.55 percent)

“About two-thirds are held in US-listed assets, including a stake in EOG Resources, one of America’s leading oil and gas players.”

Cryptocurrencies

Trump plans to make America “the crypto capital of the planet” and build a strategic reserve of bitcoin, Coatsworth notes.

Bitcoin rose to a new all-time high of $75,371.69 this morning, surpassing the previous high of $73,797.98 in March.

American markets

“If you’re bullish on US stocks and believe a Trump victory will provide new momentum for the market, the easiest way to tap into this is to buy a low-cost index fund,” said Jason Hollands, director of Bestinvest.

But he adds, “Owning an S&P 500 index fund means you have significant exposure to the Big Tech stocks that come under greater scrutiny under antitrust regulations.”

He therefore also recommends a more defensive ETF, which owns the largest thousand companies, but does not weigh them based on market capitalization, but on the basis of four fundamental factors.

These are turnover and cash flow (five-year averages), book value (at assessment date) and average total dividends (five years).

SPDR S&P 500 UCITS ETF (Ongoing costs: 0.03 percent)

FTSE RAFI US 1000 UCITS ETF (Ongoing costs: 0.39 percent)

US small and midcaps

“Trump’s ‘America First’ approach and potential tariffs, especially on Chinese goods, could create benefits for US-based small and medium-sized businesses, said Darius McDermott, managing director of FundCalibre.

“This protectionist stance could protect them from international competition and potentially increase their market share.” He tips:

Artemis American smaller companies (Ongoing costs: 0.75 percent)

T. Rowe Price Stocks of smaller US companies (Ongoing costs: 0.96 percent)

Jason Hollands also has a fund tip with exposure to small and mid-cap companies that could potentially benefit from the focus on domestic growth.

Prime Minister Miton American opportunities (Ongoing costs: 0.68 percent)