27.10.202013:16 Ανάλυση και κριτικές Forex: What will happen if Trump is re-elected?

Exchange Rates 27.10.2020 analysis

Let's start with the fact that Donald Trump loves to spend money on the military industry. This year, he decided to allocate a massive $ 705.4 billion from the country's state budget for US defense. It is logical to assume that this kind of strategy will continue even if Trump continues to hold the presidency in the White House.

Here's an example. Lockheed Martin is the world's largest manufacturer of weapons, satellite systems, software, aircraft, missiles and other weapons by volume, and is also a major supplier to the US government. Last week, this company provided investors with a third quarter earnings report that exceeded the expectations of the analysts. After that, the company's shares went up to $ 414. Therefore, it is clear that with Trump's presidency, the company's securities have high potential for further growth.

Commodity assets also expect to be supported in the future by the current president, since unlike Biden, who is going to focus on the development of alternative energy, Trump is leaning towards supporting traditional oil, gas, coal and is betting on the export of these energy resources to other countries, mainly to China.

Exxon Mobil, one of the largest oil companies in the world based in the United States, has suffered heavy losses due to the coronavirus crisis. The corporation's budget for 2020 has fallen by 30%, and operating expenses have lost a significant 15%. Also in August, it was removed from the Dow Jones. Today, it is trading at lows for the first time in 18 years. However, despite the significant decline in earnings and quotes, the company still pays out large dividends. It has a dividend yield of about 10%, which is an incomparable result or a kind of benchmark for the US market. If Trump wins the upcoming election, then the company will be able to bring stock prices back up.

The banking industry will also favor Trump. During the first four years of his presidency, banks have benefited enormously, receiving some government favors, such as the repeal of the Dodd-Frank Act, reduced oversight of regional credit organizations, and reduced corporate tax rates. In this matter, Biden's supposed power may not make the most favorable adjustments (for example, the introduction of many regulations). By the way, Mr. Biden made a proposal to reduce the budget deficit by raising corporate tax rates to 28%. Analysts believe that this will trigger a drop in shares by about 8% for the banking sector, and by 9% for the largest US Bank Bank of America. This kind of loss is certainly not significant for the BoA, but it will have a very negative impact on dividends and significantly slow down the growth of quotes. FactSet estimates the potential of Bank of America shares "above market" and advises buying shares of the conglomerate, whose target price is $28.94.

Joe Biden, in his campaign speeches, has repeatedly expressed his intention to raise the minimum wage in the United States to $15 per hour. Meanwhile, Trump prefers not to speak out on this issue. He did not make any attempts to raise the minimum salary for his entire previous term. This tactic plays into the hands of large employers who are only happy to have a large number of low-paid employees.

For example, Walmart, the world's largest supermarket chain and also the largest private employer in the United States, provides jobs for 1.5 million people. And according to Glassdoor, the average Walmart sales representative gets $11 an hour for their work. If Biden wins and implements this plan, employees' minimum wage will increase by $4 an hour, while Walmart's annual profit will fall by several billion dollars. It is clear that investors are unlikely to benefit from this.

However, if Trump wins the election, the company's share price, which has already risen over the past year, will continue to grow. In any case, many analysts strongly recommend buying Walmart securities the average price per share of which is around $147.81.

Andreeva Natalya,
Analytical expert
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