Now that the U.S. citizens have elected Republican Donald Trump as their president, the whole world is busy speculating and analyzing the impact of his economic plans on several asset classes. The initial shock resulted in a crash in market futures, though investors nerves soothed in the key trading session following Trump’s conciliatory acceptance speech.
In fact, several corners of the ETF world saw bountiful gains and hit 52-week highs. But some corners of the investing world are likely to be hit hard.
Below we highlight sectors where ETFs and stocks are in a high-risk zone now.
Trump is expected to take stricter steps on immigration and outsourcing – the both pillars that the tech sector stands on. Several technology companies like Apple Inc. (AAPL) outsource their manufacturing activities to low-cost countries like China and Taiwan. Speculation is rife that 35% tax will be levied on products manufactured outside the U.S. Technology SPDR (XLK) will thus likely come under pressure and lost over 0.1% on November 9 (read: Tech ETFs to Watch Post Apple’s Mixed Bag Q4).
The same logic is applicable for the automotive sector too. Companies like Ford Motor Company (F) and General Motors Company (GM) get their car production outsourced from Mexico. So, these companies may also bear the brunt of outsourcing.
Moreover, Ford and General Motors normally enjoy huge U.S. government subsidies which they might lose in the outsourcing practice. In any case, U.S. auto sales declined for the third consecutive month in October.
Trump’s win has by now become synonymous with Mexico’s loss. Mexico is a Trump-unfriendly investment due to his plans of building a wall along the border as part of his immigration strategy and making Mexico pay for it (read: 10 ETFs to Watch Today and After The Election).
Mexico peso slumped over 12% to a record low on cues of Trump’s victory and Mexico ETF iShares MSCI Mexico Capped (EWW) was down over 8.5% on November 9. Several Mexican stocks like Grupo Aeroportuario del Sureste, SAB de CV (ASR) and CEMEX, S.A.B. de C.V. (CX) are now in danger.
Yet again, the overall emerging market bloc may fall prey to Trump’s international policies and trade plans. Already Trump has raised questions over the longevity of trade agreements with Mexico and Canada and has opposed the pan-Pacific trade deal. And since several emerging markets including China are low cost producers and known for outsourcing, migration of services and production back to America may weigh on emerging market growth.
Emerging market ETFs like iShares MSCI Emerging Markets (EEM) (down over 3.2% on November 9), Asia ETFs like iShares Asia 50 (AIA) (down about 2.8%) or stocks like Kandi Technologies Group Inc. (KNDI), ZTO EXPRESS (CAYMAN) INC. (ZTO) and AU Optronics Corp. (AUO) may thus feel the pinch.
With Trump pledging to boost fossil fuel, alternative energy ETFs like PowerShares WilderHill Clean Energy Portfolio ETF (PBW), First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) and Guggenheim Solar ETF (TAN) will likely be hit hard. (read: 4 Frightful ETFs of This Year).
As Trump has already vowed to repeal ‘Obamacare’ and launch ‘Trumpcare ‘, beneficiaries of the Affordable Care Act like Hospital stocks may be under the gun. Hospital stock HCA Holdings Inc (HCA) plunged about 10.8% on November 9. On the ETF front,healthcare providers fund iShares US Healthcare Providers (IHF) or medical devices fund iShares US Medical Devices (IHI) lost about 1.5% and over 1.1%, respectively on November 9.
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