With the 2024 US Presidential Election on the horizon, investors are keenly assessing how a Trump victory could impact ASX shares.
One fund manager says that Australian gold companies could be in for a rough ride if Donald Trump returns to the White House.
This includes companies like De Grey Mining Ltd (ASX: DEG), Mineral Resources Ltd (ASX: MIN), and St Barbara Ltd (ASX: SBM).
As the election approaches next month, here's what Plato Investment Management says Australian investors need to know.
How would a Trump win impact ASX shares?
If the betting markets are any indication, Plato Investment Management says a Trump comeback could bring significant volatility to ASX shares, particularly in the mining sector.
Portfolio manager Dr David Allen says that history has shown gold tends to thrive during periods of political and fiscal uncertainty.
But the reaction to a Trump victory could be different this time around.
Using data obtained from prediction markets, Allen and the team at Plato have created a list of stocks to avoid in the event of a Trump re-election.
And the reasoning isn't anything political at all. Plato constructs the list of ASX shares using raw data analysis:
"These stocks have had the strongest negative price moves during instances when betting markets have recorded a 30% increase in the probability of a Trump presidential win."
Plato's list contains three ASX mining companies that may or may not surprise some investors. The firm's findings are particularly critical of gold companies – interesting, seeing as the yellow metal set another record high yesterday.
Notably, several Australian gold companies are on the list. A Trump presidency, characterised by deregulation and tax cuts, could apply downward pressure on gold, creating a headwind for gold, traditionally a safe-haven asset.
If Trump pursues more aggressive fiscal measures, US interest rates could rise, strengthening the US dollar and putting downward pressure on gold prices.
A stronger dollar could make gold less appealing to international buyers, potentially hurting Australian gold miners.
Moreover, some of these ASX shares are already experiencing a downfall. Mineral Resources shares are down more than 32% in the past year, with losses extending today after revelations on the CEO's personal tax history.
A Trump win could boost some, as well
While some stocks might struggle with a Trump presidency, Plato was prudent in providing a list of companies that could find opportunities.
It used the same criteria but did not come up with any ASX shares. These were all USA beneficiaries, concentrated in the oil & gas, semiconductors, and banking industries.
Many of these stocks tend to rise sharply whenever the market does anyways.
Despite the focus on providing a framework to invest during the election, Plato still incorporates the base fundamentals. That is, thinking long-term, and remaining diversified in risk management.
Rather than spending endless hours trying to anticipate inherently unpredictable events, we feel this is the most prudent approach to ensure your portfolio will not be significantly impacted whoever wins on November 5 – it's about protecting, not predicting
Foolish takeaway
As the US Presidential Election approaches, some ASX shares could be in for a tough ride if Plato Investment Management is correct in its analysis.
The old "this time is different" saying continuously plays amongst investor circles. But if historical data shows anything, it's that history doesn't repeat, but it often rhymes.
