The United States has consistently been a magnet for global investors, offering a dynamic and innovative stock market unmatched in size, depth, and opportunity.
For South African investors, the appeal lies in accessing world-leading companies, a thriving economic landscape and exceptional growth prospects.
With the US election outcome now determined, we can assess possible opportunities, gaining insights into shifts in investor sentiment, policies, and the future direction of global markets and trends.
A month after the November 5, 2024 US election, the S&P 500 is up over 5% while the dollar has gained 2% against major currencies and bitcoin has surged. Investors are anticipating that Trump’s plans to cut taxes, slash regulations, and focus on infrastructure spending, tech innovation, and energy independence will drive economic growth.
Even if the current optimism fades, the US will remain a premier investment destination, offering South African investors access to half of the world’s most valuable companies including Nvidia, Apple, Tesla, and Microsoft.
The US stock market has remarkable recovery capabilities, even during global uncertainty. The resilience of the dollar adds an extra layer of security for South Africans seeking to diversify internationally.
So, what can SA investors in the US market expect under the new Trump administration?
Trump’s first tenure from 2017 to 2021 was marked by a strong “America First” agenda, which included corporate tax cuts and deregulatory efforts. If the new administration adopts a similar approach, it could lead to lower tax burdens for U.S. companies, boosting profitability and enhancing shareholder returns. The year ahead may therefore bring increased share buybacks and higher dividend payouts, supporting a bullish outlook for US stocks.
Several key themes will emerge over the next four years. These offer South African investors opportunities to target specific industries, technologies, and trends through stocks, options, exchange-traded funds (ETFs), or diversified investments:
- Cryptocurrency: The push to establish the US as a global cryptocurrency hub could drive growth in blockchain technology and digital currency adoption.
Bitcoin crypto currency South Africa flag Binary code Golden Coin of Bitcoin. Alexey Struyskiy / Shutterstock.com
Gaining Exposure: ETFs like Amplify Transformational Data Sharing ETF (BLOK) and Global X Blockchain ETF (BKCH) offer diversified exposure to companies involved in blockchain technology. This approach may present less risk compared to investing in individual cryptocurrencies.
- Artificial intelligence (AI) and technology: Government and industry policies are expected to favour technological innovation, particularly in AI, quantum computing, and advanced chip manufacturing.
AI. Image by rawpixel.com on Freepik
Gaining Exposure: NVIDIA Corporation (NVDA) and Meta Platforms Inc. (META) dominate the AI industry, powering AI applications and machine learning. While ETFs like iShares Future AI & Tech ETF (ARTY) provide exposure to global companies driving advancements in robotics and AI across various sectors.
- Energy: Policies supporting energy independence could stimulate significant growth in oil, gas, and nuclear sectors. While clean energy may not be a central focus of the incoming administration, market-driven demand for renewables remains strong, creating diverse investment opportunities across the energy spectrum.
juwi Evander Solar
Gaining Exposure: ETFs like the iShares Global Clean Energy ETF (ICLN) and the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) focus on companies in renewable energy sources like solar and wind. Exxon Mobil Corporation (XOM) is one of the world’s largest oil and gas companies and could benefit from Trump administration policies supporting the continued demand for fossil fuels.
- Infrastructure and manufacturing: Plans to rebuild US infrastructure and incentivise domestic manufacturing are likely to benefit the construction, materials and industrial sectors.
Gaining Exposure: ETFs such as the Global X US Infrastructure Development ETF (PAVE) and the iShares US Infrastructure ETF (IFRA) focus on US companies likely to gain from increased infrastructure spending, offering a broad approach to investing in this sector. While mainstays like Caterpillar Inc. (CAT) remain key beneficiaries as leading providers of construction and mining equipment for infrastructure projects.
- Consumer and healthcare: Policies encouraging domestic spending and shifts in healthcare access and technology could benefit e-commerce, health tech, and consumer goods companies.
Gaining Exposure: The Consumer Discretionary Select Sector SPDR Fund (XLY) and the Vanguard Consumer Discretionary ETF (VCR) track the performance of consumer discretionary companies, offering exposure to a broad range of consumer-focused industries.
Advances in trading technology and platforms have made it easier for South African investors to access the United States markets. While there are regulatory requirements in the US and in South Africa, a local or international broker can bridge the gap allowing South African investors access to the stability, growth and diversification offered by the US stock market.
- Ricardo Da Silva is the CEO of Webull Securities South Africa
