The Industries that Could Flourish Under a Trump Presidency

Very few people thought he would actually run, then he did. They thought he wouldn’t climb in the polls, then he did.

They said he wouldn’t win any primaries, then he did. They said he wouldn’t win the Republican nomination, then he did.

Finally, they said there was no way he could compete for, let alone win, a general election.

That’s a quote from BBC news after Donald Trump became President elect on 9 November 2016.

We know now that at least 50% of Americans, and many others across the world, never thought Donald Trump would achieve the stunning result in the recently concluded 2016 US Federal Election.

So what does a Trump Presidency mean?

We know Mr. Trump has promised some of the biggest tax cuts since the Reagan era.

The US corporate tax rate is set to fall from the current rate of 35%, to 15%, if followed through.

He’s also promising massive tax cuts for working and middle income America.

The tax fix is expected to boost jobs growth and allow the repatriation of dollars currently held overseas back to the US. This is on the back of increasing expectations of stronger economic growth, higher inflation and higher rates under Trump’s presidency.

The jobs agenda is to create 25 million jobs over 10 years. This is quite possible since the recent elections resulted in the Republicans having the majority in both the House and the Senate.

With free trade, it is not that deals would be canned, but he wants to tailor them. He appears to be firmly against the Trans-Pacific Partnership. He may re-open negotiations on already signed pacts, withdrawing if US demands are not met to ensure US interests are protected.

In his victory speech, he has also made it clear he wants to work peacefully with all nations.

Having a more invigorated and confident US could very well be the real stimulus for both its own economy, with spill over impacts on the global economy, which has been somewhat plagued by low growth in Europe and elsewhere.

The biggest impact could be regulatory relief for industries that have been hampered by red tape for years.

Trump has made no secret of his intention to do away with the financial regulations put in place after the global financial crisis. This will benefit US bank profitability. The share prices of US banks have moved up strongly following the Trump win.

Another key area that Trump will be looking at is infrastructure. His immediate focus is to look at safety issues and blighted communities. Materials sector companies such as Eagle Materials [NYSE:EXP] and Vulcan Materials [NYSE:VMC] could benefit from this infrastructure push.

Trump may favour US companies, but Australian infrastructure companies that have a global footprint such as Transurban [ASX:TCL] and Macquarie Atlas Roads Group [ASX:MQA] could be watched to see if they reap dividends from infrastructure deals.

Trump had also stated during his pre-election speeches that he would be refocusing on building up the US military. The expected increased funding should have big positive flow-on effects for defence companies.

Independent oil companies might benefit if they are allowed to drill on federal lands, and the resulting higher oil production could keep prices lower. While this would be beneficial for consumers and US industries alike, it could impact the bigger players like Chevron and Exxon.

There are of course other industries like big pharmaceuticals and biotech companies that could benefit as Obamacare legislation that would have squeezed insurers’ profits may be overturned.

The post-election rally on the stock market needs to be monitored. But if pro-growth policies under Trump are implemented this should also translate into higher stock prices.

But what is not immediately clear, is that not only will we get higher stock prices, many of these policies will also translate into higher land prices.

If corporate America has their tax rate cut by more than half, it means businesses can then afford to pay more in rent for industrial and office space. Likewise, tax cuts for working class America means they can afford to pay more in rent. All gains end up in the land value eventually. Those who see the gains will be those who own the land.

Job growth, should it eventuate, will continue to keep land prices high. Likewise improvements in infrastructure will cause land price and rents to rise where it goes in.

Dismantling the financial regulations set in place after the global financial crisis, will in all likelihood lead to looser lending standards as the years roll on. Looser lending standards will only allow land prices to be bid up ever higher. It’s what brought on the so called ‘financial crisis’ of 2008 in the first place.

We’ve been saying for some time at Cycles, Trends and Forecasts that we think this current cycle being played out will be even bigger than the last one. Recent events only confirm that view. The growth under a Trump presidency could be staggering.

Remember, those who realise those gains in growth, will be those who own real estate. No one understands this more than the new man in the White House.

This real estate cycle is shaping up to be huge. To know how to profit from it and time it all to your advantage, go here.


Terence Duffy,
Lead Researcher, Cycles, Trends & Forecasts

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Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come.

Money Morning Australia