Today's markets: FTSE surges after US election result

As investors digest the US election result, risk is well bid: European markets are on the front foot catching a ride with US futures on a strong play for equity markets on both sides of the pond. 

The FTSE 100, Cac and Dax are all more than 1 per cent early doors. Gold has come back a bit with the dollar giving up some of its gains. Yields are still firmer and more of a risk-on play – hard not to rally when Dow is up, plus this is the first innings of a long game running into the inauguration.

Big London gainers include Ashtead, a straight US cyclical growth play – read across to the US small caps is clear. And then Ferrexpo – Ukraine peace play. In the US, equities are ripping higher on the Red Wave – Dow looks to open at a record, up more than 1,000 points, Russell 2,000 up 5 per cent.

Asian markets were higher except China with the Hang Seng –2 per cent and mainland China marginally weaker – China is of course the play re tariffs but you have to think that a Trump win forces the hand of Beijing to unleash full QE. Nikkei rallied on weaker JPY. 

The dollar is notching big gains but is currently a wee bit off its highs. Tough for currencies to keep selling off when risk is so strongly big in the equity space...plus the result, whilst maybe more emphatic than hoped for, was largely expected by the market. 

A reminder on what a Republican clean sweep would mean: On policy, a Republican ‘trifecta’ of securing the White House, Senate and House would result in the repeal of some elements of the Inflation Reduction Act, more China tariffs, lower regulation, lower corporate taxes, extension of individual tax cuts and be broadly reflationary. 

This scenario ought to favour short Treasuries, with yields likely rising and the curve steepening. The 10-year Treasury yield could break 5 per cent by the end of the year. Industrials, financials, energy and crypto would be among the most favoured sectors and US cyclicals doing well.  

US stocks to watch 

The US companies likely to face headwinds from tariffs include: Five Below (FIVE), Best Buy Co (BBY), Yeti Holdings (YETI), Nike (NKE), Starbucks (SBUX) and Apple (AAPL).

Defence stocks such as Lockheed Martin (LMT), are seen by many as winners from a Trump focus on military spending. One caveat to this thesis would be a potential peace deal in Ukraine, though the likes of Thales (FR:THLLY) and other European defence manufacturers could benefit from Trump pushing EU nations to spend more on defence.  

Energy stocks could move, too. We know Trump is likely to be friendly to big oil and gas, potentially easing regulations and greenlighting LNG exports. This could benefit, for instance, New Fortress Energy (NFE), Cheniere Energy (LNG), Valero (VLO), among others. Downside risks may rise for European majors like Total (FR:TTE) and Shell (SHEL).

Less obvious candidates may include Western Union (WU) – if Trump removes illegal aliens it would lower remittances; or private prison group Geo (GEO), on the basis of more people in detention facilities.

A Trump win could also spur more M&A activity through lighter regulations, and boost boutique advisory firms like Moelis (MC), PJT Partners (PJT), Evercore (EVR), and Houlihan Lokey (HLI). You could also therefore take a look at Kroger (KR), which is trying to buy Albertsons (ACI), or Capital One (COF) and its bid for Discovery (DFS).

Among social media companies, Trump Media & Technology Group (DJT) is one to watch for obvious reasons. But elsewhere check how Trump treats Section 230, which protects sites such as Meta and X from liability for the content posted by users. Any change could hurt the likes of Meta (META), Reddit (RDDT) or Snapchat (SNAP).  Some other names that could benefit from a Red Wave include Sempra (SRE), Dow Chemical (DOW), 3M (MMM) Coinbase (COIN), Haliburton (HAL), SolarEdge Technologies (SEDG).