Franklin Templeton: Energy, Financial Services, and Small Stocks Were the Biggest Winners

Christy Tan, investment strategist at Franklin Templeton Research Institute, comments on the US election, saying that sectors such as fossil fuel energy companies, the financial services industry and small-cap companies will benefit from a more favourable regulatory environment, making them the biggest winners. The pharmaceutical industry's outlook will also become clearer as concerns about prescription drug price caps fade.

With the election results in mind, it is almost certain that Trump's tax cuts in 2017 will be extended, with corporate tax rates likely to be reduced (to around 15% statutory) and corporate regulation will be overhauled. Whether tariffs will be expanded in size and scope as Trump campaigned is still unknown, and will depend on the outcome of negotiations with trade partners and the active participation of the business community.

Fixed income, the market broadly expects and fears that the government will issue more long bonds to fund short-term spending, leading to higher long bond yields. However, for investors looking six to 12 months ahead, the Fed's commitment to a loose cycle and the expectation of an overall environment that is favourable to fixed income investments will help diversify portfolios. The 10-year Treasury yield is expected to fall to 3.75% by the end of 2025, while the federal funds rate is expected to fall to 3.6%.