Donald Trump’s victory in the US presidential election reverberated across global stock markets on Wednesday, as investors raced to back the winners and sell the expected losers from his win.
The S&P 500 ended the day up 2.5 per cent, while the technology-heavy Nasdaq 100 climbed about 2.7 per cent and the Russell 2000 small-cap index advanced about 5.8 per cent.
Winners
Tesla
Shares in Tesla, whose chief executive Elon Musk became one of Trump’s most vociferous backers, surged nearly 15 per cent on Wednesday.
That boosted the net worth of Musk, the world’s richest man, by roughly $15bn.
Musk, who contributed more than $100mn to the pro-Republican America Pac, has been promised a role as head of a department of government efficiency in a second Trump administration.
Speaking at his Mar-a-Lago resort in Florida, Trump told supporters that “a star is born . . . Elon” and hailed the Tesla boss as a “super genius”.
Shares in Trump’s Truth Social media company climbed 33 per cent in morning trading but gave back most of the gains to close up 5.8 per cent.
Banks
US bank stocks jumped as investors bet interest rates would stay higher for longer under Trump and his administration would pursue a light-touch approach to regulation.
“This is an inflection point, a real game-changer,” said Mike Mayo, an analyst at Wells Fargo. “If I were to anticipate the mantra of the new administration, it’d be ‘resiliency with efficiency’, not just ‘resiliency at any cost’.”
Banks’ profits were fattened after the Federal Reserve raised interest rates to combat inflation, but that boost has faded as the central bank has started to cut borrowing costs. The KBW Nasdaq Bank index rose 10.7 per cent to reach its highest level since early 2022.
JPMorgan, Bank of America, and Citigroup closed up 11.7 per cent, 8.4 per cent and 8.5 per cent, respectively. Shares in Goldman Sachs and Morgan Stanley advanced more than 11 per cent, helped in part by the prospects that tax cuts would add momentum to a revival in dealmaking.
Manish Kabra, head of US equity strategy at Société Générale, said the prospect of a “red sweep” in which the Republicans took control of the White House and the two houses of Congress would also deliver broader benefits to companies whose fortunes are tied to the US economy.
“Buy US cyclicality: that means regional banks, private equity, private credit, oil stocks and classic reshoring beneficiaries like industrials,” Kabra said.
Private equity
Apollo Global and KKR shares led gains for private equity groups, climbing more than 10 per cent, as investors anticipated they would be winners from any pick-up in dealmaking. Blackstone advanced nearly 5 per cent.
A slowdown in mergers and acquisitions has been a drag on profits for the buyout industry, hitting lucrative performance fees and making it harder for firms to sell their portfolio companies.
Expectations that a Trump administration would introduce a more lenient regulatory regime may also help the industry in its push to sell their funds to individual investors.
Oil and gas companies
Trump courted oil companies during his campaign, vowing to rip up much of President Joe Biden’s environmental and climate agenda and imploring the industry to “drill, baby, drill”.
ExxonMobil, the biggest oil major, climbed about 2 per cent, and rival Chevron was up 2.8 per cent despite a stronger dollar hurting oil prices.
NextDecade, a developer of LNG export terminals, rose more than 15 per cent. The company’s $18.4bn Rio Grande project has been entangled in a legal morass. EQT, the US’s biggest natural gas producer, gained 7.8 per cent.
Mortgage groups
Shares in government-backed housing agencies Fannie Mae and Freddie Mac soared more than 37 per cent as investors bet Trump could push for a full privatisation of the two groups that purchase the majority of mortgages issued by banks in the US.
The government nationalised both agencies as part of their rescue during the 2008 financial crisis. But hedge fund investors, including Bill Ackman of Pershing Square, have bet for years that the government would be forced to end the conservatorship of both groups because of their revived profitability.
During Trump’s first presidency, his Treasury secretary Steven Mnuchin pushed forward part of the privatisation effort. “He will finish what he started,” said one large Fannie holder.
Prisons
Private prison stocks surged to multiyear highs as traders bet on higher rates of government outsourcing of incarcerations. Geo Group rose 42 per cent to $21.50 a share and CoreCivic, which posted strong quarterly results on Wednesday, gained 29 per cent to $17.58.
Losers
Renewables
By contrast, renewable energy companies in Europe slumped amid fears Trump could abolish the tax breaks and subsidies provided by Biden’s administration.
Denmark’s Ørsted, the world’s largest offshore wind farm developer, weakened 14.5 per cent while Danish turbine manufacturer Vestas was down more than 13 per cent.
The S&P Global Clean Energy index, which tracks the world’s largest clean energy companies, was down about 6 per cent.
Industry executives had been braced for a Trump victory, with Sean McGarvey, president of North America’s Building Trade Unions, telling a conference last week that a Trump victory would be “terrible” for the nascent US offshore wind industry.
Biden’s administration turbocharged offshore wind deployment and set a target of 30GW of offshore wind by 2030. Trump has vowed to stop projects on “day one” of the new administration.
Tariff-exposed sectors
The prospect of Trump imposing new tariffs hit shares of European carmakers. Trump has said he will introduce steep levies on imports, with a plan to impose tariffs for goods at 20 per cent for Europe and 60 per cent for China.
The broad-based Stoxx 600 autos and parts index fell 2 per cent, with the threat of tariffs on imported cars, including from Mexico and the EU, weighing on German groups such as BMW and Volkswagen, which were down more than 8 per cent and 5 per cent, respectively, before rallying slightly.
The world’s biggest shipping companies were also under pressure, with Denmark’s AP Møller-Maersk down almost 8 per cent and Germany’s Hapag-Lloyd off nearly 9 per cent.
Fears that a full-blown trade war between the US and China would reduce demand for shipping drove the sell-off, said Petter Haugen, an analyst with ABG Sundal Collier.
Real estate
US real estate investment trusts were among those hit hardest in Wednesday’s trading as the rate-sensitive sector missed out on the broader rally in equities.
Iron Mountain, which owns data storage facilities across the US, plunged nearly 9 per cent on Wednesday — even though the artificial intelligence boom, which has been boosting data centre businesses, has driven its share price up more than 66 per cent year-to-date.
American Tower Corp and Crown Castle, both of which own and operate communications infrastructure, fell more than 7 per cent and nearly 5 per cent, respectively.
Physical storage companies including Public Storage and Extra Space Storage both fell more than 4 per cent. Realty Income, a commercial real estate trust, dipped about 3 per cent.
The real estate sector of the S&P 500 dropped about 2.7 per cent overall on Wednesday. Companies connected to real estate also struggled, such as tool manufacturer Stanley Black & Decker, which fell about 4.8 per cent.
Additional reporting by Mari Novik, Sylvia Pfeifer and Rachel Millard in London and Antoine Gara and Will Schmitt in New York