U.S. stocks rallied to record highs this week on the back of Donald Trump’s presidential election victory. In our view, Trump’s policies are broadly supportive of the U.S. economy, with a distinct focus on taxes, tariffs and deregulation.
Donald Trump favours extending or potentially expanding his 2017 Tax Cuts and Jobs Act, which lowered the U.S. corporate tax rate from 35% to 21%. He has indicated a willingness to further reduce the corporate tax rate, preferentially lowering taxes for companies that manufacture locally. Under Trump’s previous administration, corporate tax cuts spurred significant growth in corporate earnings, contributing to an over 50% rally in the S&P 500 during the three years after his election.
Another key aspect of Trump’s economic plan is his proposal for sweeping tariffs ranging from 10 to 20% on all imported goods and a substantial 60% tariff on Chinese imports. If these are implemented, they will benefit U.S. domestic manufacturing and industry and negatively affect companies reliant on non-US manufacturing, including retailers and consumer goods companies.
On regulation, Trump believes that excessive government regulation is harmful. During his first term, Trump reduced regulation across the economy, most notably in the financial services and energy sectors and he has stated his intention of further reducing regulation in his second term. As well as benefiting a range of companies across the U.S., we believe deregulation should lead to a significant recovery in mergers & acquisitions (M&A) activity across both private and public markets. In recent years, M&A activity has been severely curtailed by the stronger regulatory approach taken by the Federal Trade Commission and the Department of Justice under President Biden.
The WAM Global (ASX: WGB) investment portfolio has been proactively positioned to navigate these market conditions, including avoiding exposure to companies that would be impacted by tariff increases. The portfolio has exposure to areas such as critical assets, electronic marketplaces, digital enterprises and innovative healthcare, which we believe will remain resilient. Whilst we anticipated volatility around the election, we are prepared to seize opportunities as they arise.
Stock Spotlight
Tradeweb (NASDAQ: TW)
U.S. based Tradeweb is one of our top 20 positions in the WAM Global investment portfolio. The company stands as a global leader in the development and operation of electronic marketplaces, serving a diverse network of institutional, wholesale, retail and corporate clients across various asset classes including rates, credit, money markets and equities. What makes Tradeweb particularly compelling is its promising multi-year earnings outlook. Find out why we are confident in its ability to increase operating margins and grow earnings.
