Trump Trade: President-elect seeks to kill Biden fuel-efficiency rules

Catch up on the top industries and stocks that were impacted, or were predicted to be impacted, by the comments, actions and policies of President-elect Trump with this daily recap compiled by The Fly:

FUEL-EFFICIENCY REQUIREMENTS: Donald Trump’s incoming administration is looking to lower fuel-efficiency requirements for new cars and light trucks as part of plans to unwind President Biden policies, Allyson Versprille and Jennifer Dlouhy of Bloomberg report, citing people familiar with the matter. Trump advisers plan to reexamine fuel economy requirements that were finalized in June, and are also targeting related standards imposed by the Environmental Protection Agency that limit tailpipe emissions of carbon dioxide and smog-forming compounds, sources told Bloomberg. The plan takes aim at a collection of President Biden’s policies to cut greenhouse gas emissions and push the auto industry toward electrification, Bloomberg says. Publicly traded companies in the car space include Ford (F), General Motors (GM), Honda (HMC), Mercedes-Benz (MBGYY), Nissan (NSANY), Stellantis (STLA), Tesla (TSLA), Toyota (TM) and Volkswagen (VWAGY).

U.S. COMEBACK UNCERTAINTY: Volkswagen’s bid to entice U.S. consumers with its electric vehicles in a slowing market was already a risky endeavor, but, with Donald Trump’s reelection, Volkswagen’s goal is looking more fraught than ever, Patricia Nilsson and Kana Inagaki of The Financial Times reports. With its market share in China almost halving in the past five years and its core European market demand faltering, succeeding in the U.S. market has never been more critical. However, Trump promises to scrap EV subsidies and impose tariffs on foreign-made vehicles.

EV TAX CREDIT: Numerous media sources have reported on the expectation that the incoming Trump Administration would end the Federal consumer EV tax credit under the IRA. While largely in line with market expectations, EV-exposed share prices have exhibited heightened volatility, Morgan Stanley said in a research note to investors. The firm believes that potential U.S. EV tax credit cuts may shrink the EV pie short term, extend the “ICE is Nice” trade medium term, and solidify Tesla’s relative cost dominance longer term.
Removal of EV incentives may shift the incremental would-be EV buyer into hybrid/plug-in hybrid offerings, which have already shown strong momentum with U.S. year-to-date sales +13% year-over-year, Morgan Stanley argues. While General Motors and Ford would see pressure on their EV offerings, the firm pointed out that GM and Ford’s EV sales are low single-digit-percentage of year-to-date U.S. sales and both are materially loss-making.

MEDTECH ROTATION POST RFK JR: The post-election quality growth rally in Medtech got another boost with RFK Jr. headlines, BofA said in a research note to investors. In just two days Medtech has gone to from a 20% discount to the Tools sector to a 12% discount. Medtech is now trading in line with its 10-year average discount to Tools but it is not yet above, the firm notes. Compared to the S&P Medtech is still trading at a 10% discount. Given how depressed Medtech valuations have been and how out of favor Medtech has been, BofA believes there could still be some room for multiple expansion for the entire group. Some value product stories should benefit too but it does think tariffs/FX could come back into forefront in the next 6 months, which likely keeps quality growth Medtech at an extra wide premium. Publicly traded companies in the space include Abbot (ABT), Boston Scientific (BSX), Edwards Lifesciences (EW), Intuitive Surgical (ISRG), Zimmer Biomet (ZBH) and Medtronic (MDT).

STOCK RATING, TARGET CHANGES:

• Erste Group downgraded Linde (LIN) to Hold from Buy as the environment has deteriorated following the U.S. elections, particularly in the U.S. President-elect Donald Trump’s energy policy will put the focus back on traditional energy sources, which should slow down sales growth in important Linde segments, the firm adds.
• Mizuho lowered the firm’s price target on Wolfspeed (WOLF) to $6 from $10 and keeps an Underperform rating on the shares. The firm believes the Trump administration potentially ending the $7,500 consumer electric vehicle tax credits implies risk to U.S. EV production and sales, and silicon carbide demand.
• Oppenheimer lowered the firm’s price target on Equifax (EFX) to $286 from $315 and keeps an Outperform rating on the shares. Oppenheimer believes the hiring challenges the company faced in Q3 could persist in Q4, and Trump’s presidential victory could mean government spending cut and negative impact on its Verifier.
• Citi raised the firm’s price target on Huntington Bancshares (HBAN) to $21 from $18 and keeps a Buy rating on the shares. The company is a high-quality name and checks several boxes on “Trump trade” themes but still trades at a discount to peers, the firm tells investors in a research note.

OTHER NEWS:

• Foresight Autonomous (FRSX) says 3D perception tech to comply with Trump administration regulation;
• Needham says Louisiana BEAD awards a “very positive” for Calix (CALX) and Clearfield (CLFD), and that it suspects the Trump administration is likely to remove regulations and oversight for BEAD, making the grants more attractive to operators;
• Juniper (JNPR) and HP Enterprises (HPE) said to have met with antitrust regulator at the Justice Department last week, urging the agency not to seek to block their merger. A decision on whether the U.S. will seek to block the deal could be made as soon as this week, though the companies may also delay the deal until President Trump is in office as his Justice Department may be more lenient, according to Bloomberg.