The votes are in and the result is clear: Donald Trump is set to return to the White House for a second term as President of the United States. Emboldened by the scale of the win, and with the support of a Republican majority in both Houses of Congress as well a conservative majority in the Supreme Court, Trump will likely act swiftly to enact his policy agenda.

The political considerations of a second Trump presidency are significant, both at home and abroad; as investors our focus is on what it means for the companies we invest in – in particular the global leading companies that are at the forefront of the transition to a more sustainable world through considerations of how they operate and what they sell.

American economy

Markets initially reacted to the election result with enthusiasm, as Wednesday 6th November saw the largest daily buying of US shares in five months ($20bn), and the largest daily buying of US smaller companies shares since March ($3.8bn), and the Financials sector saw its largest daily buying on record. This was largely driven by the anticipation of Trump’s introduction of trade tariffs, tax cuts and deregulation, which it is considered to  be a likely catalysts for US economic growth.

Trump’s policy platform is typically protectionist, with an indication that tariffs of 10%-20% will be applied on all imports (although it is anticipated these tariffs will be potentially much higher on Chinese imports). Economic growth forecasts remain challenged across Europe and much of Asia, with some major industries particularly exposed to the negative impact of tariffs such as those companies who supply goods or services within. construction and auto sectors.

Of course, some countries may choose to respond with tariffs of their own and the US is certainly not immune from reactive policy. However, the US has a current advantage of starting from a position of relative economic strength versus its developed market competitors.

President Trump may change less than you think

We believe our portfolio is relatively well positioned for this situation as we currently have a majority of the portfolio invested in US shares that we consider to possess sustained economic resilience over the long term – this includes a strong balance sheet, good cash generation and resilient revenue. By setting a high bar in this respect, it means we typically filter out politically sensitive companies that rely on partisan support such as subsidy dependency for their revenue.

We are alert to the potential economic vulnerability for companies based in Europe or Asia who have significant imports into the US, and we will be monitoring this going forward.

However, some types of company might be expected to face headwinds from a Trump presidency, such as those who have sought competitive advantage through reducing their carbon emissions. While Trump has made no secret of his opposition to green policies, there are pockets of US environmental-focused legislation such as the PROVE IT Act¹, which stands to benefit the cost of capital of companies that have been successful in reducing carbon emissions. It therefore should not be a surprise if the PROVE IT Act were to pass through Congress under a Republican majority.

When it comes to understanding the potential impact of a Trump presidency on social factors there is more uncertainty. The most direct revenue exposure we have in our portfolio is through the healthcare sector, however the medical insurance mechanisms in the US are well established and we don’t see a political benefit to significantly alter the status quo. Elsewhere, Trump’s stance on immigration is anticipated to have the potential to be inflationary over the medium term, since a reduction in supply of labour would typically push up wage costs for US business. We anticipate that our focus on profitability of companies in the portfolio would provide some headroom to accommodate higher wages on a peer basis, although this too is something we will continue to closely monitor as the policy landscape becomes more certain.

In summary, there are many unknowns about the scale, breadth and implication of a Republican majority across all chambers of government. As investors we remain focussed: to invest for long-term capital growth, identifying companies we consider to be leading and at the forefront of the transition to a more sustainable world, through the balance of stakeholder outcome – being planet, people and profit.

Fund specific risks

Derivative risk – the Fund may use derivatives to reduce costs and/or the overall risk of the Fund (this is also known as Efficient Portfolio Management or “EPM”). Derivatives involve a level of risk, however, for EPM they should not increase the overall riskiness of the Fund.

Currency (FX) Risk – The Fund can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as
well as rise.

Pricing risk – Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.

Counterparty Risk – The risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the Fund’s assets.

ESG Equity Data – The Fund uses data from third parties (which may include providers for research, reports, screenings, ratings and/or analysis such as index
providers and consultants) and that information or data may be incomplete, inaccurate or inconsistent.

ESG and Sustainability – Investments are selected or excluded on both financial and non-financial criteria. The Fund’s performance may differ from the broader market or other Funds that do not utilise ESG/Sustainability criteria when selecting investments.

For a more detailed explanation of risk factors, please refer to the “Risk Factors” section of the Scheme Particulars.

¹Full name: the Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency (PROVE IT) Act, S.1863 –S.1863 – 118th Congress (2023-2024): PROVE IT Act of 2024 | Congress.gov | Library of Congress

 

The value of active minds – independent thinking

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Important information

This document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with a financial adviser, particularly if you are unsure whether an investment is suitable. Jupiter is unable to provide investment advice. Past performance is no guide to the future. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.  The views expressed are those of the authors at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change.  This is particularly true during periods of rapidly changing market circumstances. For definitions please see the glossary at jupiteram.com. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Company examples are for illustrative purposes only and not a recommendation to buy or sell. Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ are authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM or JAM.