The Australian investment banking industry could enjoy a sugar hit from Donald Trump’s election victory, based on the way some of the biggest Wall Street banks have traded on the back of the result.
The Wall Street Journal reported that investors bet banks were poised to benefit from reduced regulation and a fresh acceleration in growth, sending shares in JPMorgan Chase up 12 per cent to a record high on Wednesday. Wells Fargo and Goldman Sachs both rose 13 per cent.
The Wall Street banks have already substantially trimmed their workforces in Australia on the back of less deal activity in the aftermath of the global pandemic, but now that trend could reverse if activity picks up and they start hiring.
With more profits from deals in their home markets, they have more ability to expand, and activity should flow from that.
The election win for Trump also saw strong gains to the US dollar.
Deal makers are predicting that if the US dollar stays high, it may lead to more inbound mergers and acquisitions activity into Australia, which would enable US companies to more easily make the numbers work for opportunities here.
However, should Trump place large tariffs of 30 to 50 per cent on China, as some have been expecting, it could weaken the Australian economy given the strong trading relationship with the Asian superpower. This would make opportunities here less attractive for a US group.
Instead, US groups may turn to embarking on deals in the domestic market, where companies are generating stronger earnings.
Shares in Macquarie Group, rose 1.6 per cent to close at $229.52 on Thursday.
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