Rudi's View | Nov 07 2024
By Rudi Filapek-Vandyck, Editor
It'll take a good 2.5 months before the 47th US president will be ready to re-enter the White House, but already analysts have identified the first potential victim from potential import tariffs: Breville Group ((BRG)).
The company released a robust H1 trading update on Wednesday this week, but the Republican victory on the same day hangs as the Sword of Damocles over its share price.
Management at Breville Group is on the case, however, with inventories being built up on US soil before any tariffs might be called upon, plus Breville is redirecting its manufacturing away from China.
Given management has time on its hands, the de-risking of the threat of tariff disruptions in 2025 should be taken as a positive by investors, though questions will be asked about any impact on gross margin and/or product quality from these changes.
Such questions can only be answered as time goes by.
On the other hand, Ansell ((ANN)) has been identified as one potential beneficiary by UBS as US tariffs will make Chinese glove imports uncompetitive in the American market.
The coming days and weeks will see a lot more research and analysis, and predictions about who, what, where and when now that President Trump has won the US election for a second time.
Below are some of the quote-worthy snippets from the early harvest on the day after the 2024 election.
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From Wilsons:
"Historically, higher average annualized returns have occurred during a divided Congress, with lower returns seen during Democratic majorities in both the House and Senate, and higher returns under Republican control of both chambers.
Nonetheless, the market has historically delivered positive returns under all six government compositions.
Consequently, the equity market has largely been unaffected by US Presidential election outcomes. The direction of the market, regardless of the election result, has traditionally been driven by fundamental factors such as interest rates and corporate earnings.
However, we do see some significant tail risk in Trump's stated policy agenda, despite the seemingly comforting lessons from history.
While history cautions again about getting too focused on the result of this week's election, the potential for a Trump trade war and a burgeoning US fiscal deficit are certainly shaping up as significant wildcards for the next couple of years."
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Chris Haynes, Head of Equities at Equity Trustees Asset Management:
"Trump's policies are undoubtedly pro US growth and inflationary. The combination of greater tax cuts, higher government spending and prospect of significant tariffs are likely to keep inflation higher and reduce pace of interest rate cuts.
"Australia has a large numbers of companies with US dollar exposure which overall should be beneficiaries of a pro-business administration.
"The US first/aggressive China push will be a headwind for global growth and China in particular. Steel exports from China potentially impacted, which could be a negative for Australian commodities, particularly energy and iron ore. Thus, negative for BHP, RIO, FMG.
"Much will depend on how China reacts."
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Laura Cooper, Head of Macro Credit, Nuveen:
"Markets must contend with a potential fiscal injection at a time of economic strength and the inflationary implications could drive US yields higher with the curve bear steepening in early price action.
"What has been surprising is the posturing for the inflationary backdrop without consideration of the negative growth impact should widespread tariffs arise.
"Timelines matter, as the sequencing of tax cut extensions versus tariff implementation, will impact the medium-term growth trajectory. Tariffs could initially be growth negative while the impact of other stimulative initiatives may take longer.
"The sustainability of US growth in an environment of elevated yields is questionable.
"And the unknown impact of second order effects depends on what will the retaliatory measures be, even if the US is a relatively insulated economy, it is likely not negligible and business sentiment could be impacted."
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Oxford Economics:
"The outlook for 2025 doesn't change appreciably because it will take time for changes in fiscal, trade, and immigration policy to be implemented and impact the economy. Our new forecast anticipates real GDP growth will be 0.3ppts higher in 2026 than under a continuation of the previous political balance.
"However, as the fiscal support fades and the drag from immigration cuts intensifies, the deviation from the continuation of the current balance narrows before falling 0.6ppts lower in 2028."
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