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UPDATE: The stock price winners and losers of the Trump presidency

Posted by
Swiss Finance Institute
on
Sunday, April 30, 2017 - 08:00

Donald Trump’s election as president of the USA caught observers off guard, with an impact on stock markets that was both immediate and significant. But with the passing of time, things were sure to calm down. Or were they? The March edition of SFI’s Practitioner Roundups looked at how US stock prices performed until year-end 2016. Now that Trump has reached the 100 day-mark it’s time to reflect on the more recent developments in the stock market.

 

Investigating the ups and downs of Russell 3000 stocks to mid-March 2017 yields some striking results. Following Trump’s election win, several high-beta industries (those that are perceived to carry greater exposure to the market but also the potential to deliver higher returns) enjoyed a boost up to the end of 2016. But investors will be disappointed if they’d hoped that these short-term gains would last. These industries—for example printing, steel, transportation, textiles, and precious metals—have underperformed the market so far in 2017. This may reflect partly a softening of economic growth expectations.

 

And what about reactions to Trump’s corporate tax proposals and more aggressive US trade policy? The initial reactions to the proposed corporate tax cuts have remained sustained since year-end 2016. Trump has proposed sharp cuts in US corporate taxes, which currently stand at 35 percent. This helped the stocks of high-tax firms but hit those carrying forward significant net operating losses. And the stocks of domestically-oriented companies benefited, while the internationally-oriented ones suffered.

 

How government policy plays out in practice remains to be seen, of course. If President Trump has demonstrated one thing in his time in office, it’s that he’s not afraid to change his mind.

 

Read our further insights into these issues here.