Linda Kong Ting
Senior Director and Credit Analyst, Asset Management

LinkedIn

Election certainty has produced a wave of ebullience in financial markets, with stocks decisively higher, credit tighter and rates much higher on expectations that a Donald Trump presidency will stimulate the economy with tax cuts but could also bring inflation-stoking tariffs and rising debt. While the higher-rate backdrop should benefit both banks and insurance companies, many types of financials also appear poised to benefit from a potentially lighter touch on regulatory issues, as well as higher merger-and-acquisition volumes under a presumably more-permissive Federal Trade Commission.

On the other hand, real estate will likely be more mixed, as higher rates may affect those companies that did not take the opportunity to refinance in the recent lull, and the commercial real estate story has still not fully played out. Residential real estate may continue to show low activity as elevated rates will keep most on the sidelines. The picture in industrials is somewhat less clear as winners and losers will very much depend on the precise impact of still-unspecified tariffs and the potential rollback of various industrial policies under the Joe Biden presidency. However, with sectors like consumer discretionary and clean energy equities already reeling before the election, it is unclear how much further underperformance might be in store. We also note that on top of the large rate move, there has been further curve steepening, and the back end of the curve now yields as much as Treasury bills for the first time since mid-2022. This could be an interesting opportunity for accounts that are looking to move into duration to lock in equity gains.

Source: Bloomberg, 2024. 

The information may include statements which reflect expectations or forecasts of future events. Such forward-looking statements are speculative in nature and may be subject to risks, uncertainties and assumptions and actual results which could differ significantly from the statements. All opinions and commentary are subject to change without notice. SLC Management is not affiliated with, nor endorsing, any third parties mentioned within this article.

Market insights are based on individual portfolio manager opinions and market observations. These are observations only and are not intended to provide specific financial, tax, investment, insurance, legal or accounting advice and should not be relied upon and does not constitute a specific offer to buy and/or sell securities, insurance or investment services. Investors should consult with their professional advisors before acting upon any information posted here.

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