In a recent analysis, Goldman Sachs Group Inc. strategists caution that a potential victory for Donald Trump in the US presidential election could pose significant threats to European stocks. The warning specifically points to Germany’s benchmark DAX Index, the mid-cap MDAX Index, and economically-sensitive cyclical sectors in the region, such as industrials, chemicals, and autos, as being particularly exposed.
Goldman’s Sharon Bell, leading the team, emphasizes the heightened risks surrounding the scenario, citing concerns over potential increases in tariffs on Europe and a reduction in US funding/support for Ukraine in the event of a Trump victory. Drawing parallels from Trump’s previous term, the analysts highlight historical weakness in European steel stocks compared to the region’s market and US peers after the Trump administration imposed tariffs on imports from the European Union, Canada, and Mexico.
While the presidential election race is still unfolding, with Trump nearing the Republican nomination, analysts suggest that a Trump victory could impact European markets. Data compiled by Bloomberg indicates that, during Trump’s last term, Europe’s underperformance compared to the US was more pronounced than during the current Biden administration.
Notably, other financial institutions, such as Barclays Plc and Citigroup Inc., echo these concerns. Barclays’ strategist Emmanuel Cau notes the threat of new or higher tariffs on European Union and China imports, potentially affecting sentiment towards European, German, and Chinese equities. Citigroup strategists point out the mixed performance of regional equities around the US vote.
Goldman Sachs identifies the Swiss Market Index and the UK’s FTSE 100 as the areas least exposed to the outcome of a Trump win. Defensive sectors like health care and consumer staples are also highlighted as tending to outperform during periods of rising policy uncertainty.
As the US election unfolds and potential scenarios emerge, financial markets remain vigilant about the possible implications for global economic dynamics and regional stock performances.
