Small cap, energy and US bank ETFs surged on news of Donald Trump’s US presidential election victory and a Republican ‘clean sweep’ looking possible.
Should the Republicans secure a majority in the House of Representatives – a Senate majority is already confirmed – the pathway will be clear for Trump to enact much of his policy agenda.
One key proposal concerns corporation tax, with the President-elect planning to reduce it from 21% to 15%. This will directly benefit company bottom lines, with lower margin, cyclical businesses particularly advantaged.
Small caps therefore rallied as the outcome became clear, with the SPDR Russell 2000 U.S. Small Cap UCITS ETF (R2SC) up 6.7% at Wednesday's Europe close. Large caps, on the other hand, had a relatively sluggish day. The iShares Core S&P 500 UCITS ETF (CSPX) closed just 0.7% above water.
US banks also enjoyed a pop on the news. Trump’s pro-business agenda points to greater investment and deregulation for the sector, helping the Xtrackers MSCI USA Financials UCITS ETF 1D (XUFN) advance 4.1%.
There were mixed fortunes across the energy spectrum, however.
Trump intends to roll back on regulation that impedes fossil fuel production, causing the SPDR S&P U.S. Energy Select Sector UCITS ETF (SXLE) to climb 3.2%.
The iShares Global Clean Energy UCITS ETF (INRG), in contrast, plummeted 5.9% given Trump’s plans to ‘rescind all unspent funds’ under the Inflation Reduction Act – the signature climate policy of the Biden administration.
Longer-dated yields ticked up on the news, given Trump's more expansionary fiscal stance, sending the iShares $ Treasury Bond 20+yr UCITS ETF (DTLA) down 2.0%.
It was also a tough day for China equity ETFs. The incoming President has vowed to impose a 60% tariff on imports from the country, prompting the iShares MSCI China UCITS ETF (CNYA) to drop 1.9% on the day.
Emerging markets more broadly were calmer, with the iShares MSCI EM Ex China UCITS ETF (EXCS) edging just 0.2% lower.
Perhaps the day’s biggest movers were in the cryptocurrency space. The ETC Group Physical Bitcoin ETP (BTCE) product closed 7.6%, while the VanEck Crypto and Blockchain Innovators UCITS ETF (DAPP) closed 15.7% in positive territory.
