The Trump Effect: Unpacking the Winners and Losers of the President’s Return
As the dust settles on Donald Trump’s return to the White House, investors are betting big on four key areas: immigration reform, rewards for Elon Musk, deregulation, and a windfall for state-backed mortgage guarantors Fannie Mae and Freddie Mac.
Fannie and Freddie: The Big Winners
Holders of preferred shares in Fannie and Freddie are expecting a multibillion-dollar payout if the new administration privatizes the mortgage-finance giants. Since the election, the value of these shares has more than tripled, thanks in part to hedge-fund manager Bill Ackman’s public endorsement of the trade.
Tesla: A Budding Bromance
The electric car maker has seen its market value soar by half a trillion dollars since Election Day, thanks to Trump’s budding friendship with Elon Musk. This 35% gain is a significant chunk of the total gains of S&P 500 companies.
Private Prisons: A Booming Business
Shares in CoreCivic and Geo Group, which run detention centers for immigrants, have skyrocketed on the promise of increased deportations. Geo’s shares have more than doubled, while CoreCivic is up 66%, mirroring Tesla’s gains.
Bitcoin: A Cryptocurrency Boom
Trump’s promises to relax regulations and build a government stockpile of cryptocurrencies have sent Bitcoin and ether soaring, with both up around 40% since the election.
The Losers: Smaller Stocks and Big Oil
Despite initial hopes that Trump’s policies would boost smaller stocks, the Russell 2000 index has given back all its post-election gains. Big Oil stocks are also down, despite the president’s “drill baby drill” mantra.
A Warning: Disappointment Looms
With the most successful Trump trades experiencing spectacular gains, there is a serious risk of disappointment. If Trump’s promises don’t materialize, or if his relationships with Musk and other beneficiaries sour, investors could be left with significant losses.
Leave a Reply