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 domestic-focused, lower margin 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.
