Stephanie Batchelor: Milford Asset Management analyst on Trump's impact on the markets one week on

It's been a week since Donald Trump won the US election - and the markets underwent a shift once the results became clear. 

Small to medium-sized businesses have picked up - and they're expecting to see a boost driven by proposed tax cuts and fewer regulations.

Milford Asset Management's Stephanie Batchelor unpacked the results further.

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Episode Transcript

Speaker 1 (00:00):
Stephanie Bachelor, Milford Asset Management. Hey, Steph. Hi, hevery Steph.
We've had about a week of trading now since Trump
won the election. So what are you seeing a week
on in terms of themes positive or negative? Now that
the dusters may be settled a little bit.

Speaker 2 (00:13):
Yeah, So there's been a lot going on, but it's
all really been a risk on attitude, driven by the
fact that most of Trump's policies are very pro growth. So,
for example, small and medium sized businesses, particularly in software,
have done very well and they're expected to see a
boost from his support of business policies, things like tax
cuts and less regulation. Another sector benefiting from that deregulation

(00:35):
theme is financials. They've done very well, also helped by
tax cuts and more supportive conditions for mergers and acquisitions.
Another one is consumer discretionary, so that's moved higher. It's
a sector that tends to do well as growth picks up,
and now that the overhang of the election has gone
and we're heading into the holiday season, it's expected that
consumers will start feeling good and spending again. But on

(00:59):
the flips, and of course, the consumer companies that are
exposed to tariffs so, for example, any companies that import
goods from China, they've been seeing a bit of pressure.
And another area that's seeing pressure is clean energy or renewables. So,
as you know, Trump supports traditional oil and gas and
so he's expected to enact supportive policy there while reversing

(01:21):
some of the more green friendly policies.

Speaker 1 (01:23):
But how long is it going to take for him
to implement some of these policies.

Speaker 2 (01:27):
Well, it's looking like it will be a red sweep,
so Republicans in both the Senate and the House, so
that will make it a lot easier for Trump to
enact as policies, but he still will need to convince
the more moderate members of his party and there are
still some checks and balances in place. The makeup of
his cabinet appointees will also be key, and he's going
through that process right now. But in terms of timing,

(01:49):
so it's thought that tax cuts might be the first
cab off the rank. He's hoping to see those flow
on growth impacts much more quickly than he did when
he implemented tax cuts back in his first term. Whereas
the more extreme policies, so the ones around tariffs and immigration,
they'll probably take a little bit longer to implement, and
he'll also want to be quite careful because those sorts

(02:10):
of policies are more inflationary, and he's not going to
want to derail his sort of overarching plan, which is
to stimulate growth and boost US businesses.

Speaker 1 (02:20):
Tesla has appears to have been one of the big
winners post election. I mean, their shares we're up I
think something like forty percent over four days. Why has
it been so strong?

Speaker 2 (02:29):
Yes, So a large part of it is that Elon
Musk has been one of Trump's most visible and outspoken supporters,
and Trump seems to view him as a trusted voice.
So he's apparently been spending a lot of time with
Trump since the election, you know, even weighing in on
staffing decisions for the next administration. And actually Trump has
just confirmed that Musk, along with one other will lead

(02:50):
a new Department of Government Efficiency, and so they'll be
tasked with cutting bureaucracy, wasteful spending, removing excess regulations, and
even restructuring federal agencies. So this is certainly going to
give him a lot of power. And Musk has presumably
also been hoping that Trump will make certain decisions that
will help his various businesses that he has.

Speaker 1 (03:12):
Hence the rally in his stock price. All right, now,
the FED it cut the rates by a quarter of
a percent last week, which is pretty much expected. I
think we've had quite a few conversations now on the
show in the last few days where it's starting to
look like Trump's victory actually means the interest rate cuts
are not as strong as we would have thought. Would
that be what you think?

Speaker 2 (03:32):
Yeah, that's fair. On the FED chair Jeroone Power was
specifically asked at on the press conference and sort of saying,
you know, can the election outcome impact the path for
the future interest rate cuts? And his response was that
for now, there's no immediate impact, given we don't know
the timing or substance of any new policies. So he said,
you know, we don't guess, we don't speculate, we don't assume.

(03:53):
So for now they do remain on a rate cutting path.
But obviously how Trump's policies end up impacting the economic
data further down the track will have an effect. And
so I mentioned a lot of his policies are inflationary,
and so that would reduce the number of rate cuts
that fed implements, and actually the market is already starting
to price that in. So it's pricing in that rate

(04:13):
cuts will potentially stop much earlier and at a rate
that's much higher versus what was expected you back in
a few months ago.

Speaker 1 (04:22):
Yeah, Steph, thank you so much. Stepanie Bachelor, Milford Asset Management.
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