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An Investor's Guide to a Donald Trump Presidency

The election is only a few months away and it's shaping up to be the most tumultuous one in recent history. Although it’s impossible to know who will win, many speculate that a Trump presidency would send the economy and stock market into a downward spiral. Experts are also drawing parallels between the audacious Trump campaign and the recent Brexit vote. His supporters, like leave voters, are tired with the status quo and would do anything to see that change. If the offbeat republican happens to win the White House, there are few themes investors should watch.

(Note: You can read the Investor's Guide to a Hillary Clinton presidency here)

Construction & Materials

So far it has been difficult to pin down the potential polices of a Trump administration. Many of his proposals have been driven by emotion, making it difficult to take them seriously. From the very beginning he made it clear that he intends to build a wall on the border of Mexico to deter illegal immigrants. If this becomes a reality, construction and builders are in for a payday. Building the proposed 1,000 mile border wall would require an immense amount of materials and labor. Companies like Deere & Co (DE), U.S. Steel (X) and Caterpillar (CAT) would see a sharp uptake in business if construction got underway.

Multinationals

Trump has also been strongly opposed to our current trade agreements. According to him, they have been a major contributor to our massive current account deficit and is one of the reasons why the U.S. is no longer great. Under his jurisdiction, all agreements would be renegotiated or torn up.

This would have grave consequences for U.S. companies that do business overseas. Corporate conglomerates like Amazon (AMZN) and Walmart (WMT), which have a huge global footprint, could see earnings and revenue growth significantly decline. On the other hand, small cap stocks would benefit from Trump’s protectionist trade policy. This might level the playing field in the short term but it would impede long term growth prospects and potentially lead to a global recession.

Defense & Security

Protecting second amendment rights is just another one of Trump’s promises to make America great again. He has alluded to making gun permits valid in all 50 states which bodes well for the firearm industry. Both Smith & Wesson (SWHC) and Sturm, Ruger & Company (RGR), which have been doing well after the recent shootings, are well positioned to prosper regardless of the election’s outcome.

Trump has also publicly stated his administration would take a strong militaristic approach in the Middle East and around the world. Boosting military spending, which is already high, would mean a great deal to whomever secures the newest government contracts. Look for gains from Lockheed Martin (LMT) and General Dynamics (GD) if Trump takes office this January.

Agriculture and Food Industry

Immigrants and cheap labor are the backbone of both the agriculture and food industry. Building a wall and banning immigrants, as Trump has suggested, would not only impact farmers, but also most Americans. We could see an abrupt drop in farm income which would be partially offset by the resulting spike in food prices. Taking more money out of consumer’s pockets prevents them from spending elsewhere and thereby stalls economic growth.

Corporate Taxes

Trump’s tax plan would substantially lower corporate income taxes by eliminating the complexities that are driving corporate inversions. The proposed plan would lower the tax to 15%, making the U.S. nearly on par with tax-friendly Ireland. This would greatly increase revenue for multinationals and the government.

Apple (AAPL), for example, could repatriate the $200+ billion it has overseas for use in M&A and product innovation. At the moment, the top 50 U.S. companies hold $1.4 trillion offshore to avoid the 35% federal tax rate. Lowering the threshold would provide a huge boost to corporate growth, which had otherwise been lacking.

Concluding Remarks

The presumptive Republican nominee has taken a lot of controversial positions that are likely to sway the stock market. His proposed policies would have a direct impact on the economy, but also the fortunes of sectors such as defense, manufacturing, and agriculture. Electing Trump will likely ruffle markets at first, as he breeds the most uncertainty. But investors would be wise to keep a long term focus even if that means taking a near term hit.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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