US election shakes up commodity markets; spotlight on China and trade policies 

Q We’re still waiting for confirmation on whether there will be a full red sweep in Congress. How have markets reacted so far, and what can investors expect going forward?

So far, we’ve seen US equities perform strongly, reaching new highs. This rally was largely driven by expectations of corporate tax cuts and a more expansive fiscal stance under Trump. It's also driven up the US dollar, which has put some downward pressure on commodities, with gold pulling back from record highs. Finally, there’s concern that additional tariffs on China could dampen growth further.

Looking ahead, the next key development will be the Chinese response. We’re expecting updates from the Chinese government at the end of this week. We will also be watching how markets react to potential US fiscal changes. If Trump proceeds with lower taxes and increased spending, it will impact the US fiscal balance.

Q How will the outcome of this election impact US international relations with China and other countries, and what could this mean for investors in this space?

Trump has been very vocal about the tariffs he plans to impose on China and potentially other countries. It’s important to remember that Chinese exports to the US have decreased as a share of their overall exports in recent years, so China isn't as reliant on the US market as it once was — but it’s still a significant factor.

On the other hand, there’s the possibility that Trump could broker a deal around Russia and Ukraine, which could reopen gas flows into Europe. That would be a positive development for the European economy if it happens. However, he remains quite hawkish on Iran, which could create more instability in the Middle East and drive up oil prices.

Overall, we’re looking at a period of geopolitical volatility that could also bring some opportunities for investors.

Q From a regulatory perspective, what changes should we expect and how might these affect natural resource companies?

I think the most obvious changes in the US will be in domestic planning, and deregulation. We’ve seen a pause in new gas pipeline projects, but we expect that to lift under the new administration. Similarly, the pause on new LNG projects could come to an end. There are also many mining projects awaiting permits that have been held up due to environmental concerns. If Trump follows through on his promise to ease regulations, we could see more mine approvals in the coming years.

Q How do you expect the election to affect the energy markets generally, and the oil price in particular?

I think the impact on oil will probably be neutral overall. A more hawkish stance on Iran could potentially be positive for oil prices, but tariffs on China could slow growth, which might have a negative effect. As for increased drilling, we think the US upstream sector will maintain the capital discipline it has demonstrated, so we don’t foresee a major change in US supply. Additionally, there could be some tinkering with IRA tax credits for clean energy, which might slow the rollout of certain projects, though this is unclear at this stage.

Q Beyond energy, are there any sectors within this diversified space that you expect to benefit from the election outcome? Conversely, are there any sectors that may face headwinds?

I think companies with a strong US domestic focus stand to benefit. In the energy space, for example, US midstream pipeline operators could see gains from higher volumes and more relaxed planning regulations. On the metals side, we’ve already seen a significant reaction from steel companies, and domestic aluminium producers are likely to benefit from higher tariffs. On the other hand, gold companies have faced pressure due to the stronger dollar. When Trump was last elected, gold underperformed for a few months. This time, given the state of the US fiscal balance, I’m not convinced that the trend will last as long, although we could see short-term weakness.

Q Finally, what changes have you made or are currently making to your portfolios?

As active managers, we made adjustments due to the uncertainty leading up to this period. We reduced our risk exposure, particularly in clean energy, and increased our weighting in US names. We also trimmed our gold holdings after the gold price reached record highs a few weeks ago. Now, we’re monitoring the situation to see what opportunities arise, but are waiting to see how China reacts before making further portfolio changes at this stage.

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