Donald Trump. Loved by millions, hated by even more. This article will not be a political discussion nor will I give you my opinion about Donald Trump. Why? Because fact is that he will be the president of the United States for the coming 4 years. We as investors have to deal with that.
Therefore I wanted to give you a little heads up on how to benefit financially from Trump’s presidency. What stock market sectors are likely to profit from Donald Trump and possibly offers attractive investments during Donald Trump’s presidency.
Biotechnology & Pharmaceutial Sector
As soon as it became clear that Donald Trump was going to win the elections, biotechnology stocks rose by 3 – 6%. This is mainly because of two reasons.
- Hillary Clinton was expected to become president. Her policy was more strict on drug pricing which would hurt profit margins in the biotech and pharma sector. This caused stocks in these sectors to decline in the last few months. However, as Hillary Clinton did not become president, biotech and pharma stocks received a big boost.
- Donald Trump’s administration is expected to take a more lenient approach and leave the pricing of drugs unchanged.
Both arguments enable biotech and pharmaceuticals to sustain their profitability levels.
Another sector that is likely to benefit from Donald Trump’s presidency is the defense sector. President Trump promised that during his presidency, military spending will increase. For example, new ships and new fighter aircraft will be purchased to strengthen the US Military. This is likely to be very beneficial for companies in the defense sector such as Lockheed Martin, Northrop Grumman, Boeing or Raytheon.
Oil & Gas Sector
Donald Trump isn’t particularly in favour of renewable energy. Trump even went as far as saying that climate change is a hoax and that he would cancel the Paris climate agreement that over 195 countries have signed. Yet Trump seeks to make the US energy independent. Therefore, Trump suggested to increase exploration for oil and gas on American soil. Trump called for more drilling, fewer regulations and the approval of the Keystone XL oil pipeline from Canada. This will benefit US based oil and gas related companies such as Chevron, ConocoPhillips and many others.
On a personal note : I have absolute faith in renewable energy and believe it is our ultimate source of energy in the future. However, as said earlier, I only want to inform you how particular stock markets will be affected by Trumps presidency. Fact is that the renewable energy sector will receive a blow, while the oil & gas industry will receive a boost from Donald Trump’s policies.
Construction & Infrastructure sector
As a major part of ‘Making America Great Again’, Trump promised that he will rebuild the country’s infrastructure. “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” is what Mr. Trump said in his acceptance speech.
Combine this promise with the fact that he seeks to limit trade with Mexico and China, and we can quickly conclude that US based construction companies are likely to be the big winners. Think of companies such as General Electric, Fluor Corp. and Caterpillar, who could see an increased boost in profits due to more government spending.
What to do?
I have mentioned some examples of companies that might profit from Trump’s presidency. This doesn’t mean that they actually will profit. Always do your careful research if you want to invest in companies from the mentioned sectors.
Analyse whether they are financially stable, have the best management teams and are able to consistently earn high levels of profitability before you invest your money.