Trump Win Would Pose Threat to European Stocks, Goldman Says

Farah Elbahrawy
·2 min read
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(Bloomberg) -- A scenario in which Donald Trump is elected US President would heighten risks across large parts of Europe’s stock market, Goldman Sachs Group Inc. strategists said.

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Germany’s benchmark DAX Index, its mid-cap MDAX Index and economically-sensitive cyclical sectors in the region— like industrials, chemicals and autos — would be the most exposed in the event of victory for the Republican candidate, a team led by Sharon Bell wrote in a note.

“We would expect higher risks around both an increase in tariffs on Europe and a reduction in US funding/support for Ukraine,” she wrote.

The presidential election race is still in its early stages. For now, Trump is on the cusp of clinching the Republican presidential nomination and is poised to eliminate challenger Nikki Haley next month, which would tee up an all-but-certain rematch with President Joe Biden.

Using Trump’s last term as a guide, the strategists pointed to weakness in European steel stocks versus the region’s market and US peers in the months after the Trump administration imposed tariffs on imports from the European Union, Canada and Mexico.

Though Europe typically lags growth-heavy US stocks, the underperformance was more pronounced during Trump’s previous term compared to during the current Biden administration, according to data compiled by Bloomberg.

Read more: Trump Racing Toward 2024 Biden Rematch After New Hampshire

Last week, Barclays Plc strategist Emmanuel Cau also said the threat of new or higher tariffs on European Union and China imports could hurt sentiment toward European, German and Chinese equities. Citigroup Inc. strategists said US equities usually rise before and after elections, but regional equities’ performance is mixed around the US vote.

The areas least exposed in the outcome of a Trump win would include the Swiss Market Index and the UK’s FTSE 100, Goldman’s Bell said. Defensive sectors such as health care and consumer staples also tend to outperform when policy uncertainty is rising, she added.

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