Following this month’s US election, Donald Trump is set to re-enter the White House in January 2025, alongside a Republican majority in the Senate and House of Representatives.
The Republican’s ‘Red Sweep’ across the executive and legislative branches of government has created both opportunities and tail risks in a number of sectors for ASX investors to consider.
Trump’s victory brings with it both tailwinds and headwinds for ASX companies that have meaningful exposure to the US economy.
Tailwinds will include Trump’s pro-business agenda of tax cuts, deregulation (particularly of the energy sector), and support for US manufacturing. On the other hand, Trump’s protectionist trade policies – including the threat of increased tariffs – create tail risks for global companies that import goods into the US, particularly those with manufacturing facilities in China.
This report discusses the implications of Trump’s presidency for the Focus Portfolio’s positions in Aristocrat, James Hardie, Breville, CSL, Santos, and Worley.
Pro-Business Agenda
Key beneficiaries: US earners (and taxpayers) – Aristocrat, James Hardie, Breville, CSL
The major near-term tailwind of a Trump presidency will be his ‘pro-growth agenda’ of corporate and personal tax cuts and deregulation, which will benefit companies with meaningful operations in the US.
Corporate tax cuts may present a meaningful earnings tailwind for companies that operate and pay taxes in the US, noting that some companies operating in the US market translate their earnings back to AUD and pay taxes locally.
Major beneficiaries of US tax cuts would include Focus Portfolio holdings Aristocrat, James Hardie, Breville, and CSL, alongside some of the other companies displayed in figure 1.
Trade and Tariff Risks
Trump’s protectionist stance on global trade is arguably the greatest tail risk of his administration, particularly for ASX companies that import goods into the US market. Yesterday (on 26/11/2024), Trump announced his plans to impose a 25% tariff on all goods imported from Mexico and Canada, alongside an additional 10% tariff on goods imported from China on top of existing levies.
Trump’s nominee for Treasury Department secretary, Scott Bessent, who is a renowned hedge fund manager and macro strategist, has previously defended the use of import tariffs as a ‘useful negotiating tool’ to bring other countries to the table on trade. This risk is most relevant for the portfolio's holding in Breville (explored below).
Tail risks: Breville
Given Breville’s products are predominantly manufactured in China, while its largest end-market is the US (with North America accounting for ~55% of global product sales), the company faces the tail risk of potential tariffs on consumer goods under a Trump administration.
While US tariffs on Breville products are not certain (arguably they are a negotiation tactic to ‘bring other countries to the table’ on trade), Breville’s management is acting proactively to mitigate the risk of tariffs.
- US inventory build – the company will continue its inventory build in the US unabated, likely until the increased tariffs are enforced, which provides confidence in the near-term. Breville has the advantage of being able to hold elevated levels of inventory without discounting. This is because the appliance category does not have a meaningful risk of product obsolescence, unlike other product categories (e.g. apparel).
- Shifting manufacturing out of China – Breville is targeting ~80% of its US-bound product manufacturing to be moved out of China by end-2025, into countries like Indonesia and Cambodia, using existing manufacturing partners.
Using history as a guide, we note that Breville has weathered a relatively tariff-heavy Trump (and Biden) administration well in the past, and the company has also demonstrated its ability to raise prices over time (to ‘pass on’ higher costs and tariffs) without materially impacting product sales volumes.
During the 2017-2021 Trump presidency, ~10-25% tariffs were enacted on consumer items (vs Trump’s current proposal of 10% tariffs on imports from China), which impacted Breville over FY19-FY20. Breville’s strategic response included price increases on select SKUs and a tactical inventory build in the US. In its 1H20 conference call, the business indicated that the estimated tariff impact on its gross margins was ‘only’ ~20-30bps, while top-line growth remained strong.
Leaving aside the uncertainties of Trump, on a positive note, Breville’s AGM commentary confirmed that top-line momentum remains strong.
New products continue to ‘perform well’ and positive 2H24a sell-in (to retailer) trends have continued. This was reaffirmed by Williams Sonoma (a key US retailer of Breville products) as it recently upgraded its full-year revenue guidance amidst stronger than expected trading.
Mixed impacts: James Hardie
Given James Hardie’s extensive US manufacturing, the business faces little-to-no tariff-related risks, while the business will also benefit from US tax cuts (as aforementioned) and Trump’s housing-friendly policy agenda, which aims to cut regulation to boost construction and address the country’s housing shortage.
On the other hand, as a mortgage-rate sensitive business, demand for James Hardie’s building products could also be adversely impacted by Trump’s stimulatory spending (and tariff) plans – should they lead to a meaningful reacceleration in inflation and ‘higher for longer’ long-term bond yields.
We are actively monitoring mortgage rates and their second-order impact on US building material demand. However, James Hardie’s quality attributes and its skew towards the more defensive repair and remodelling market (~65% of sales), alongside its recent guidance of a return to North American volume growth in FY26, keeps us positive towards the company.
Energy Sector Support – 'Drill Baby Drill!'
Key beneficiaries: Santos, Worley
The Trump administration - and his nominee for the Department of Energy secretary, Chris Wright, who is the CEO of Liberty Energy and has been a vocal critic of net zero policies- will be unapologetically pro fossil fuels and focused on boosting American oil and gas production.
Santos – Pikka sell-down back on the table?
Trump has voiced his support for the Alaskan energy sector, stating he ‘will ensure the gasline (pipeline) project be built for Alaska’s domestic market and allies all over the world’.
Trump’s presidency will be a welcome shift in policy, after the Biden administration introduced 66 separate executive orders and actions that hampered the progress of energy projects in Alaska. Many, if not all, of these actions will likely be rescinded by Trump, which should support oil and gas project acceleration in Alaska.
This backdrop is a positive for Santos’ Alaskan oil project, Pikka. While the project is already on track for ‘first oil’ in 1H26, a supportive regulatory setting could garner further farminee interest in the asset, potentially supporting a full or partial sell-down (noting Santos has failed to sell-down its 51% stake previously).
A full or partial sell-down of Pikka would unlock capital and allow Santos to bolster its capital returns to shareholders, in line with its latest capital allocation framework unveiled at the AGM last week. Pleasingly, the business now plans to return 60% of free cash flows to shareholders (vs 40% previously) once Pikka and Barossa come online.
Worley – LNG project pipeline de-risked
Worley will be a net beneficiary of Trump’s looming presidency in our view, as it has solidified the prospect of Venture Global’s CP2 LNG project being approved, which is set to be Worley’s largest-ever project. The now very likely approval of CP2 LNG by the Trump administration will support a significant uplift in Worley’s backlog, and should deliver up to ~$600m in EBITA over the medium-term. We expect CP2 LNG to support EBITA growth of up to ~30% in FY26e, compared to the consensus forecasts of ~16%.
Read Investing in the Sustainable Energy Supercycle
Worley has noted that Trump’s election could alter the ‘timing of capital allocation between traditional, transitional, and sustainable investment', while pointing to ‘significant opportunities’ for LNG projects.
Under Trump, the rate of renewable investments could slow, although given the spending from Biden’s Inflation Reduction Act is concentrated in ‘red’ states, Trump will arguably be dissuaded from dismantling the act completely. Moreover, we note sustainability investments are often driven principally by shareholder (ESG) expectations and corporate sustainability targets, rather than government policy.
In any case, one of Worley’s greatest competitive strengths is its diversity and its ability to be nimble with its project mix over time, which has been demonstrated by its pivot towards sustainability-related work in recent years. The business is well placed to ‘follow the money’ and compete for (and win) tenders in whichever part of the market they arise. We expect that any headwinds to renewable spending are likely to be more than offset by tailwinds for traditional and transitional energy investment under Trump’s presidency.
Healthcare – RFK Risks are Overblown
Company in focus: CSL
Trump’s nomination of Robert F. Kennedy Junior (RFK) for the role of the Department of Health and Human Services secretary has driven weakness among US vaccine and pharmaceutical companies, which includes CSL’s Seqirus business.
While RFK is a renowned vaccine-sceptic, he has publicly stated he has no plans to ‘ban’ vaccines and that his focus is on ensuring transparency of vaccine safety and efficacy information. In any case, we assess negligible risks to our investment thesis for CSL, noting:
- As a relatively controversial nominee, it is uncertain whether RFK will be confirmed by the Senate.
- Trump’s nominee for FDA commissioner, Dr Martin Makary, is ‘pro-vaccine’ (albeit he is ‘anti-mandate').
- It is unlikely that any federal policy changes could meaningfully impact vaccine demand or dismantle existing vaccine distribution channels, which are controlled by state and local governments and have been in place for decades.
- Seqirus accounts for ~17% of CSL’s EBIT and is not a meaningful contributor to its medium-term earnings growth outlook (or our investment thesis).
Written by
Greg Burke, Equity Strategist
Greg is an Equity Strategist in the Investment Strategy team at Wilsons Advisory. He is the lead portfolio manager of the Wilsons Advisory Australian Equity Focus Portfolio and is responsible for the ongoing management of the Global Equity Opportunities List.
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