The Trump effect remains in play for the markets, with a potential return to the White House by former President Donald Trump scrambling stocks as investors speculate on which industries might stand to benefit from the election.
An assassination attempt on former President Trump during a campaign rally in Butler, PA boosted his odds of victory in the 2024 elections in November.
But adding to the sense of unpredictability in political news is the surprise withdrawal of President Joe Biden from the 2024 race, capping weeks of speculation following a shaky debate performance. Biden endorsed Vice President Kamala Harris.
Trump is still seen by the market as having an advantage to win the 2024 elections in November. Markets are increasingly pricing in the odds of a Trump victory. The move is crowning some winners — and putting pressure on other industries.
Healthcare Sees Clearer Consolidation
U.S. healthcare stocks are expecting a friendlier approach from a potential Trump administration. Analysts say UnitedHealth Group could see fewer antitrust concerns as it tries to vertically integrate its health services arm with its managed-care division, IBD's Jed Graham reports.
A Trump victory could also boost stocks connected to Medicare Advantage, the more privatized Medicare program, according to a report from the Wall Street Journal.
Energy: Oil & Gas Rise, Renewables Fall
Investors also see winners and losers in the energy sector, with oil and gas stocks rising alongside Trump's odds. Coal stocks are also attracting investor attention.
Trump has made clear his support of the oil, gas and coal industries, which includes reducing regulations aimed at protecting the environment and reducing pollution.
Solar stocks and other renewable-based stocks are also taking a hit as a Trump presidency likely means a de-emphasis on green energy.
The effects are likely to be accelerated by a recent Supreme Court ruling that effectively curtailed the power of administrative agencies in policymaking. The overturned framework was known as the "Chevron deference" and gave regulator and agency decisions the final say in interpreting policies in law as experts in their field. The move is expected to rein in agencies like the Environmental Protection Agency, with courts now able to question or overturn decisions made by the agency.
Big Tech Braces For Regulation
Big tech stocks have been pummeled by sector rotation, but are now bracing for the possibility of more government scrutiny. Trump's recently announced vice presidential pick for 2024, Senator J.D. Vance (R-Ohio), has signaled support of antitrust enforcement aimed at big tech companies like Meta.
China-owned social media platform TikTok, meanwhile, could avoid a looming U.S. market ban. In a recent interview from Bloomberg, Trump said "I'm for TikTok because you need competition. If you don't have TikTok, you have Facebook and Instagram." TikTok, which is ultimately owned by Beijing-based ByteDance, subject to a new law that requires ByteDance to divest its U.S. assets or be banned from the U.S. market.
Senator Vance's nomination also has a knock-on effect for crypto and bitcoin, with bullishness growing over anticipated crypto-friendly regulatory landscapes, IBD's Harrison Miller reports.
Trump Shakes Up Semis
Semiconductor stocks, meanwhile, are sliding on headlines from both political parties.
The Biden administration is reportedly considering severe trade restrictions on advanced chip technology exports to China. The new rules could restrict the export even of foreign-made products that use any U.S. technology, IBD's Patrick Seitz reports. ASML, which makes manufacturing equipment essential to producing advanced semiconductors, saw a slump on the news.
Meanwhile, in an interview with Bloomberg, Trump said Taiwan should pay the U.S. for protection, saying the island "did take about 100% of our chip business," and that "Taiwan doesn't give us anything."
China claims the self-governed island, which holds democratic elections, as part of its territory, and has threatened the use of force to reclaim Taiwan.
Taiwan is critical to the world's supply of microchips, designing and fabricating the technologies used in everything from chipsets that specialize in generative AI computations to automobile control switches. Taiwan Semiconductor Manufacturing has its most advanced chip factories in Taiwan, making chips for the likes of Nvidia, Broadcom, Apple and many more.
The news has weighed on those major chip industry players, although companies offering chip foundry services, like Intel and Global Foundries, saw a slight boost.
Market Rotations Continue
But big moves in the market aren't entirely caused by shifting political tides. What is certain is a marge market rotation occurring. Investors are moving away from megacap tech stocks and into smallcap and industry groups. Such investments were out of vogue as the "Magnificent Seven" dominated in the first half of 2024.
The shift also comes as key inflation indicators fuel hopes for Fed rate cuts, spurring action into stocks expected to benefit from lower interest rates.
Meanwhile, Vice President Harris's surprise entry into the race has given the election yet another wildcard. With polls around the U.S. opening a little more than 100 days away, much of the market reaction remains speculative.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
