US Post-Election Market Overview

Tariff:
Trump’s tariffs are expected to be bargaining tools in trade negotiations, gradually implemented to drive favorable terms for US manufacturing and protect corporate supply chains.

Tax:
The reduction in corporate tax rates to 15%-20% enhances profitability, improves cash flow, and supports equity markets, particularly benefiting small and medium enterprises.

USD:
A strategically weaker USD is likely to boost export competitiveness and support the goal of revitalizing US manufacturing.

Infrastructure:
Defense infrastructure investments will likely focus on modernizing military facilities, strengthening supply chains, and advancing cybersecurity capabilities. These initiatives position the defense industry for long-term growth and align with national security priorities.

Energy:
Traditional energy sources, including fossil fuels and nuclear energy, are expected to remain central under Trump’s policies. Drilling and exploration activities are likely to expand, while nuclear energy offers stability and aligns with high-demand sectors like technology and AI.

Tariff:

Tariffs are one of the primary tools under Trump’s presidency to achieve the “America First” agenda. Although Trump’s administration plans to employ a blanket tariff of 10% to 20% on all imports, as well as additional 60% to 100% tariffs on specific products, we believe the tariffs will not increase immediately but will be implemented gradually. This delay is not because Trump does not want to benefit US corporations but reflects the complexities of balancing domestic and global economic considerations. Meanwhile, we anticipate that China’s economy will be significantly impacted, as its position as the world's largest manufacturing country will face challenges.

Trump’s tariff strategy goes beyond a purely economic approach; it serves as a powerful bargaining chip in negotiations with other countries—not just China, but also the EU and other trade partners. By using tariffs as leverage, Trump aims to compel counterparts to the negotiating table, setting the stage for broader discussions on trade, manufacturing, and currency dynamics. Once these discussions are underway, the subsequent steps of his strategy, such as encouraging domestic manufacturing and enhancing US corporate competitiveness, come into play.

The first reason behind the gradual approach to tariff implementation is the globalized nature of many US corporations. A sudden and aggressive increase in tariffs could inadvertently harm US companies that have significant overseas operations. For example, Tesla’s electric vehicle manufacturing facility in Shanghai or Intel's semiconductor facility in Vietnam would face higher costs, disrupted supply chains, and reduced competitiveness. Trump likely understands that strengthening US corporations requires careful management of these complexities to avoid unintended consequences.

Another crucial consideration is that the ultimate goal of Trump’s tariff plan is to encourage the US to return to being the world's leading manufacturer of high-end products. However, this is not a shift that can happen overnight…... It involves a plenty of processes, such as managing talent both overseas and domestically, relocating equipment to onshore facilities, investing in real estate, and re-establishing supply chains. All these changes are required significant time, planning, and corporate management, making an immediate transformation is unrealistic despite government intentions.

In essence, Trump’s tariff policy is not solely about protectionism for American First but is part of an international strategic vision. By leveraging tariffs in international negotiations, we anticipate Trump seeks to secure favourable terms for US high-end manufacturing like Chips, while gradually implementing measures to ensure that domestic corporations can thrive amidst global competition. This dual approach allows the US to strengthen its position as both an economic powerhouse and a global manufacturing leader.

Tax:

Corporate tax policy is another critical component of the US economy, particularly under Trump’s administration. The recent policy proposal aims to reduce the corporate income tax rate from 21% to a range of 20% to 15%, with the exact rate contingent on sector-specific considerations and economic conditions. We render the views that this policy will have a  favorable impact on the US economy, as reducing corporate tax obligations directly enhances company profitability and shareholder value.

Currently, while many companies generate substantial revenue, indeed a large portion of these earnings is allocated to operating expenses, other essential expenses, often leaving only modest pre-tax net income. The application of corporate tax further reduces net income, impacting both profitability and the cash flow. Looking ahead, the tax reduction policy is structured to benefit companies across the earnings spectrum, if reduction of corporate tax is implemented fully, small and medium enterprises will likely benefit the most, the lower tax rate allows businesses to retain a larger portion of their net income. Ultimately, it is benefiting the overall equity markets, particularly for below sectors.

USD Position in World Markets

While many investors expect that the USD keeps remain strong after the election due to perceptions of a robust US economy, yet we think a different trajectory. The US has strategic reasons for wanting to lower its exchange rate relative to other major currencies, primarily to foster a more favourable trade environment for exports. As previously mentioned, the US aims to re-establish itself as a manufacturing giant around the globe again, and a more competitively valued USD would play a crucial role in making US goods attractive in the global market.

The way to achieving this isn’t through traditional means, such as buying corresponding FX pairs to drive the USD down. Instead, we believe the US is likely to pursue policies that indirectly pressure other countries to strengthen their currencies. Tariffs, trade agreements, and economic policy initiatives will incentivize or pressure trade partners to adjust their exchange rates and trade more with Non-US counterparts. Moving forward, a strategically managed USD position, can strengthen the dollar’s role in global trade finance as no one wants to pay more money to get the same stuffs. We are confident that a competitive USD supports the US in maintaining its currency’s relevance in the FX market by making it a more suitable and widely accessible currency for international trade.

Infrastructure

Under Trump's administration, infrastructure has been a cornerstone of policy discussions, we believe that Trump will have a renewed emphasis on enhancing national defence infrastructure. Recognizing the importance of infrastructure not only in economic development but also in national security, as per previous experiences, the administration has directed significant attention toward upgrading and expanding critical infrastructure supporting the US defence sector.

As Trump’s focus on defence infrastructure includes strategic investments in military facilities, cybersecurity networks, and defence manufacturing capabilities. By upgrading military bases, defence technology infrastructure, and fortifying supply chains, the administration aims to strengthen the resilience and efficiency of the US military. We think that it would be benefiting defence manufacturing stocks particularly like Lockheed Martin (LMT US) and Northrop Grumman (NOC US), where their national defence orders have been declined in previous years, both of which play vital roles in producing military aircraft, missiles, and advanced defence systems, thinking Trump’s presidency would definitely bring some edges to them.

Energy

The last topic of discussion is energy. Trump’s energy policy strongly emphasized traditional fossil fuels, aiming to bolster US energy independence and achieve “energy dominance.” His administration championed oil, natural gas, and coal production by rolling back regulations, expanding drilling opportunities on federal lands, and supporting cost-effective energy production. Trump’s stance also included some support for nuclear energy as a stable, carbon-free alternative, though renewable energy received less attention, with subsidies and incentives reduced during his tenure.

Despite Trump’s advocacy for oil, we think the oil companies are not the final winner in this game given oil price is likely to be declined for better supply under the Trump’s administration, we believe the real opportunity lies in drilling and exploration companies, which stand to benefit from increased domestic energy activities under policies favouring fossil fuels. Key players such as Halliburton (HAL US) and Baker Hughes (BKR US) provide essential equipment, technology, and services that support oil and gas exploration, are hot and needed to watch out.

In contrast, the current energy market outlook is pivoting toward renewable energy, propelled by global demand for sustainable solutions and technological advancements. Solar, wind, and battery storage are becoming increasingly cost competitive and scalable, attracting significant investment from PE and real estate investors. While Trump’s policies leaned heavily on traditional energy sources, the market is signalling a broader transformation in the global energy mix, who wins is hard to say now.

Although Trump favoured oil, the volatility of oil prices is actually subject to fluctuations in OPEC’s production decision, actual demand, and market hedging, which making more challenge for its price. Given this volatility, nuclear energy aligns well with Trump's goals, offering a more stable and carbon-free energy source. We anticipate Constellation Energy Group (CEG US) is well-positioned to benefit from his preference, as it is the largest power provider in the US with a solid foundation in nuclear energy. Likewise, CEG’s recent signed a contract with Microsoft to supply nuclear-generated electricity to power its data centres AI development adds further strength to its profile. This strategic partnership not only supports the growth of AI but also emphasizes the role of nuclear energy in high-demand tech sectors, positioning CEG as a crucial player during Trump's focus on resilient, large-scale energy infrastructure.

Conclusion

Under Trump’s presidency, we anticipate that the US economy will remain resilient, driven by policies designed to bolster domestic manufacturing, reduce corporate taxes, and strengthen energy independence. However, one key challenge is the unpredictability associated with Trump’s leadership style. While he may currently have a strong rapport with figures like Elon Musk, it is worth to recall the past instances, such as his falling out with former ally Rex Tillerson….., which highlight his tendency to shift alliances when circumstances change as Elon and Trump both have a strong personal view while love to have controlling power. At the end of the day, markets thrive on stability, but with Trump at the helm, uncertainties remain a defining feature of the economic landscape. For what he does next, we better sit back and watch.