Stocks and markets to watch when Donald Trump is inaugurated
Donald Trump’s second inauguration is set for 20 January 2025. Which markets are most likely to respond to a new President?
Trump 2.0: top market segments to tatch
Republican Donald Trump is returning to the White House on 20 January 2025. In his second term, the new President’s party controls both the House of Representatives and the Senate, and has also installed a majority of the judges in the Supreme Court.
All being equal, Trump will now wield significantly more power than in his first term where several of the other branches of government were under the control of the Democrats. Of course, the US remains the world’s largest economy, and its political leader is going to affect almost every market to some degree.
But here’s the top segments to watch in anticipation:
Elon Musk’s portfolio
Elon Musk, the serial entrepreneur behind some of the world’s most innovative companies, is being hailed as a major winner of the recent US election. Shares in Tesla have surged, reflecting market confidence in Musk's position. Musk was one of Donald Trump’s key financial backers during the campaign, and their close relationship has raised speculation about his growing influence.
In a surprising development, Musk has been appointed to lead the new Department of Government Efficiency (DOGE). This role is expected to provide him with a platform to influence significant political decisions, potentially increasing his power in both the corporate and public sectors.
SpaceX and Starlink: record valuations and IPO speculation
While Tesla grabs the headlines, Musk’s other ventures deserve attention. SpaceX, now valued at a record $350 billion, continues to revolutionise space exploration and satellite communications. Its subsidiary, Starlink, is playing a pivotal role in expanding global internet access.
Analysts suggest a SpaceX IPO could be on the horizon for 2025. If it goes ahead, it would likely be one of the most anticipated stock market launches in history, capturing widespread investor interest.
Cryptocurrency stocks
Coinbase is positioned as a potential beneficiary of the new administration's policies, alongside other crypto-focused companies such as CleanSpark, Riot Platforms, and Marathon Digital. However, much of the market’s attention is centred on MicroStrategy.
MicroStrategy’s high-risk bitcoin strategy
MicroStrategy has adopted a bold strategy, borrowing funds to acquire bitcoin through the issuance of convertible notes. These financial instruments, which can be converted into company stock, are being used to raise significant capital for further bitcoin purchases.
While this approach carries substantial risk, it highlights the supportive stance of the new administration towards cryptocurrency. The departure of SEC Chair and crypto-sceptic Gary Gensler on Trump’s first day in office signals a shift in regulatory attitudes, paving the way for potentially greater institutional adoption of digital assets.
Bitcoin volatility and its impact on MicroStrategy shares
Bitcoin’s surge above $100,000 following Trump’s victory has been a boon for MicroStrategy, yet the inherent volatility of cryptocurrencies could pose challenges. A significant pullback in bitcoin’s value might disproportionately impact MicroStrategy’s stock price, given its heavy reliance on the cryptocurrency.
Conversely, reports that Trump is considering the establishment of a strategic bitcoin reserve could strengthen confidence in bitcoin as an alternative investment, potentially boosting MicroStrategy’s market position.
Gold/USD
In the immediate aftermath of the election, gold retreated from its record highs but has since recovered to $2650/oz. The precious metal remains in focus as investors assess the potential impact of new economic policies.
Tariffs, spending, and the impact on gold
Should Trump implement a trifecta of tariffs, higher spending, and tax cuts, interest rates could remain elevated for an extended period. This scenario may strengthen the US dollar (USD) and exert downward pressure on gold prices. However, tariffs also introduce uncertainty into the global economy, which could drive more investors toward gold as a safe haven asset.
Additionally, the proposed establishment of a US strategic Bitcoin reserve may impact gold’s appeal as a traditional safe haven, potentially diverting investment into cryptocurrency.
Gold has defied traditional economic expectations since the pandemic. Many analysts anticipated that higher interest rates would depress gold prices, yet the metal has soared to record highs. This unexpected trend may reflect broader concerns about the stability of US debt, overriding textbook economic principles.
Oil and gas
During his election campaign, Trump championed the slogan ‘Drill, Baby Drill’ as part of his strategy to stimulate the economy and suppress inflation. While Exxon’s Upstream President, Liam Mallon, has expressed scepticism, Trump is expected to expand oil and gas drilling on federal lands.
This aligns with Scott Bessent's ‘3-3-3’ plan, which aims to boost US oil production by an additional 3 million barrels per day, up from the current record of 13.3 million barrels.
The US oil landscape and price implications
As the world’s largest oil producer, the US already dominates global production. An increase in supply under Trump’s policies could exert downward pressure on oil prices. However, several factors could mitigate these effects, including heightened uncertainty and conflict in the Middle East, as well as potential intervention by the Organization of the Petroleum Exporting Countries (OPEC) cartel.
Ukraine war
President-elect Donald Trump has pledged to end the Ukraine war promptly upon taking office. While this goal may be ambitious, the current stalemate suggests that both parties might be open to negotiations.
A peace agreement would likely lead to the lifting of Western sanctions on Russia, significantly affecting global commodity markets and the broader economy. Notably, Ukraine-based iron ore producer Ferrexpo could experience increased production and export capabilities, enhancing its financial performance.
Similarly, Bank of Georgia might benefit from improved Russia-US relations, potentially leading to increased regional economic stability and growth opportunities.
However, the situation remains fluid, and the outcomes will depend on the specifics of any peace agreement and the subsequent geopolitical landscape.
Banks
Leading US financial institutions may gain an advantage from what is expected to be looser regulation and more favourable tax policies following Donald Trump’s victory. Shares in JP Morgan, Wells Fargo, and Goldman Sachs, among others, posted strong gains on results day.
Among a host of potential changes, some analysts suggest that the controversial Basel III endgame capital framework, which has been stalled for over a year, could either be scrapped or significantly diluted.
Additionally, newly proposed rules related to long-term debt and liquidity requirements may not materialise, reducing the regulatory burden on financial institutions.
Prison and firearms
President-elect Donald Trump has appointed Tom Homan, former acting director of U.S. Immigration and Customs Enforcement (ICE), as the administration's "border czar."
Homan plans to implement a comprehensive mass deportation operation, which will necessitate increased detention capacity. The GEO Group's chairman indicated in a recent conference call that he anticipates the government will fund between 70,000 and 100,000 beds in ICE detention centres, approximately double the current capacity.
This expansion is expected to benefit private prison operators such as GEO Group and CoreCivic.
Historically, Republican administrations have been associated with more lenient gun regulations. Analysts predict that this trend will continue, potentially benefiting firearms manufacturers. Companies like AMMO, Inc and Smith & Wesson Brands have already experienced stock gains in anticipation of these policy shifts.
Trump Media & Technology Group
‘Truth Social’, the social media platform owned by Trump Media & Technology Group (TMTG), has experienced significant financial challenges since its launch. In the first quarter of 2024, TMTG reported a net loss of $327.6 million, with only $770,000 in revenue. The second quarter saw a net loss of $16.4 million and a slight revenue increase to $837,000.
Despite these financial setbacks, Truth Social's stock, traded under the ticker symbol DJT, has become a focal point for meme stock traders. The stock has exhibited extreme volatility, often reflecting former President Donald Trump's political fortunes. For instance, in the weeks leading up to the 2024 election, DJT's stock price surged nearly 200%, resulting in substantial losses for short sellers.
Defence and health
Global defence spending reached a record $2.4 trillion in 2023. However, defence budgets may face cuts under former President Trump's efficiency drive, potentially impacting major US stocks reliant on government contracts. Companies such as General Dynamics, Lockheed Martin, and Northrop Grumman could be affected.
Despite these concerns, several analysts suggest that fears of reduced spending are overstated. They argue that defence expenditure is likely to remain robust due to ongoing global volatility and security challenges.
Healthcare insurers: potential gains ahead
Healthcare insurers, including UnitedHealth and Humana, may benefit from anticipated increases in rates for private Medicare providers under new government policies. These adjustments could offer significant growth opportunities for the sector.
China
Sino-US relations have long been strained, yet trade between the two nations hit a record $575 billion in 2023, extending a growth trend. Despite this, the US continues to impose restrictions on tech exports to China, while Beijing retaliates with bans on critical mineral exports. However, China’s wavering economic growth could pose medium-term risks.
Resource opportunities: ex-China critical minerals
In the near term, resource companies with access to non-China sources of critical minerals may present opportunities. These firms stand to benefit from expedited government grants and favourable loans aimed at supporting increased or start-up production in this critical sector.
How to trade the markets as Trump takes power
- Research political events' impact on markets
- Open an account with IG
- Monitor political developments and market reactions
- Pick a market to invest in
- Implement risk management strategies
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