The stock market is poised for its second straight day of strong gains as investors digest the effect president-elect Donald Trump will have on their investments.
Amid Wednesday’s robust rally that saw several sector heavyweights soar to new highs, there were also some losers, such as the so-called “FANG stocks”: Facebook, Inc. (FB), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX) and Alphabet, Inc. (GOOGL) all ended Wednesday’s session in negative territory. Investors have begun to speculate about which companies might be hurt under a Trump presidency. (See also: How a President Trump Would Disrupt Tech.)
What do these companies have in common? The bulk of their revenues come from overseas markets. Multinational companies with revenue streams in trade-sensitive regions may become casualties of stricter trade policies. In a note to investors Tuesday, RBC Capital Markets analysts Matthew Hedberg and Ross MacMillan said that Trump’s victory may lead to a slight decline in IT spending against the backdrop of weak equity markets.
“While it may take time for the election results to change the overall demand environment, given valuations of many growth software names, we think the software market could trade with a multiple to the market,” the analysts explained.
The uncertainty about potential changes to international trade agreements is believed to be affecting large tech multinationals such as Microsoft Corporation (MSFT), which generates more than half of total revenue overseas. In terms of geographies, Microsoft gets 10% of its revenue from Mainland China and 4% from Japan, while Germany brings in 3.2%.
Microsoft shares closed on Wednesday at $60.17, down 0.50%. While Mr. Trump’s “America first” philosophy resonated with his voters, the exclusionary implication may pressure multinational firms until his trade policies are put in place. (See also: Trump Win Could Disrupt Fintech Industry.)