Increased likelihood of Trump returning to White House prompts market rotations among different sectors.

From Nasdaq: 2024-07-17 16:49:00

Following an attempt on his life, the odds of Donald Trump returning to the White House have increased, prompting anticipation of Federal Reserve interest rate cuts in September. Investors respond with market rotations, favoring areas that may benefit from a second Trump presidency and selling off others that may see losses.

Trump’s preference for higher tariffs, particularly on Chinese imports, could impact semiconductor stocks like NVIDIA and Super Micro Computer. Comments on Taiwan have led to a chip stock sell-off and a 7% drop in the VanEck Semiconductor ETF. Deregulation under Trump may benefit health insurance, energy, finance, and small-cap companies.

Proposed extensions of tax cuts could lead to higher budget deficits and government borrowing, resulting in a surge in longer-dated bond yields. The Biden administration’s focus on green energy may shift, potentially leading to cuts in subsidies that have caused solar and clean energy ETFs to plummet recently. Trump’s support for oil companies and drilling may lower energy prices, which could negatively impact the energy sector.

Cryptocurrencies and related stocks have surged in hopes of a more crypto-friendly administration. Tesla CEO Elon Musk’s endorsement of Trump may influence the former president’s stance on electric vehicles. Even if EV purchase-tax credits are eliminated, analysts believe Tesla will still have an advantage compared to its peers. The iShares Bitcoin Trust is up over 10% this week.

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