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Your Guide to What Trump’s Second Season Means Washington, Business and World
Donald Trump is currently selecting winners and losers in Corporate America. This opens up new thrilling opportunities for those who are confident in predicting the next step for the president and are confident in potentially astounding risks that are dangerous to everyone else.
Over the past few weeks, some extraordinary scenes have been brought. Every day it becomes clear that we are no longer left to the invisible hands of capitalism to figure out who will win in the money game. Instead, the Trump administration has set a whole new rule and is proud of it.
Last week, it said it was granted Newfangle’s export licenses to Chips Monster Nvidia and AMD, and that certain products could be sent to China. The government will cut revenues by 15%. I’ll set aside security concerns for a while now. “What’s next? Do you want Lockheed Martin to sell the F-35 to China for a 15% commission?” As one expert put it to us this week. Instead, focus on the seemingly unprecedented nature of these licensing transactions and consider how the Trump administration will be awarded in the future.
Treasury Secretary Scott Bescent said the deal is “unique” but now it’s lined up with “Why not expand?”
Meanwhile, examples of corporate faces that have a crush on big men are becoming more common. Earlier this month, Apple’s Tim Cook presented Trump with what he described as a 24-carat gold block of two iPhones glued together. This was a special gift from a man who dumped $700 million in the aftermath of the president’s global trade tariff announcement on April 2.
It is almost nothing new for the president’s administration to support a particular sector. Joe Biden, for example, led the vast government support for the green energy sector through the Inflation Reduction Act of 2022.
But this is different. It’s personal, completely public and very specific. And so far, it’s been pretty good for sweet spot companies. AMD’s shares have been worth almost 6% since the Chinese trade was revealed. Apple has grown by 13% since Cook delivered his gift. Since Trump returned to the White House, all cryptocurrency stocks have been leaping, reflecting the enthusiasm he and his sons have shown for the sector. For investors, the insights that other companies and sectors can give thumbs up in the future will have real benefits.
However, the thumb is not necessarily facing upwards. Witness the sorry story of Tesla. The stock has fallen 17% so far after CEO Elon Musk boosted his bust with the president. Intel’s shares fell temporarily in early August after the president called for the CEO to resign. Recently, they shot higher filming with signs that the Trump administration is considering a bravely interventionist step of buying stocks in the company.
Taken together, this means that the president’s whims must be taken more seriously. This should be taken more seriously due to the enormous weight, whether they are stockpiles or index huggers, as big technology (the main target of Trump’s attention at this point) is occupying the main stock index. For now, for example, the wind has been blown away by Nvidia’s favor, but what if you were to change direction at another point in Trump’s terminology? What if a small, less resilient company somehow attracts the president’s rage?
It is impossible to predict which companies will win and loser here, but investors know that they have no choice but to involve them. “One easy thing to predict is that there is policy volatility and disruption in all sectors,” said Shep Perkins, Chief Investment Officer at Putnam Investments. “President Trump loves to trade.”
When looking for clues on how this pans out, it is useful to think about China, which has brought many nasty regulatory surprises to investors in recent years. For example, in 2021, authorities in Beijing began cracking down on education companies. Investors haven’t seen this coming, and some stocks that are directly affected have threw as much as 40% in a day. The technology crackdown of the same year hit individual Chinese-related stocks, such as passenger Didi.
At the time, many global investors saw China as a potential winner in the declining COVID pandemic. This was what we thought was the country would suffer first from the virus and recover first. However, repeated, targeted policy shocks had little unpredictable foundation, which led many of these investors to view the market as uninvestible.
Obviously, the US is not yet at that point. But the increasingly assertive president, riding on a buoyant market that has not been pushed back by his whimsical instincts, can easily make and break stock picker years without warning.
katie.martin@ft.com
