Daniel Loeb, the influential hedge fund manager of Third Point, has expressed his belief that the probability of former President Donald Trump winning the U.S. presidency in the upcoming November election is increasing. As a result, Loeb is enhancing positions that are likely to benefit from a Republican administration and Congress. In a letter to investors, obtained by CNBC, Loeb stated, “We believe that the likelihood of a Republican victory in the White House has increased, which would have a positive impact on certain sectors and the market overall.” He further elaborated that the proposed ‘America First’ policy’s tariffs are expected to boost domestic manufacturing, increase infrastructure spending, and raise prices of certain materials and commodities. Additionally, he anticipates that a reduction in regulations, particularly the Biden-Harris administration’s activist antitrust approach, will foster productivity and encourage corporate activity.
Polls indicate a close race this November, with a recent NBC News poll showing a tie between the Republican nominee and Vice President Kamala Harris. However, Loeb mentioned in his quarterly report that he is increasing both stock and option purchases in anticipation of a Trump victory. Loeb is not the only investor on Wall Street with such expectations; JPMorgan has also highlighted gains in bank stocks and the U.S. dollar as indicators of a potential Republican win.
Loeb identified several companies that could benefit from deregulation and increased domestic manufacturing under Trump, including utility PG & E, nuclear power company Vistra, and conglomerate Danaher. Alphabet, which has faced scrutiny from the Biden administration for alleged antitrust violations and is also part of Loeb’s portfolio, could also see advantages.
Moreover, Loeb predicts that Republicans will secure a majority in the Senate, regardless of the presidential race outcome, thus minimizing potential downsides for these stocks even if Harris prevails. His note comes during a period when Third Point Offshore has underperformed relative to the S&P 500 this year, with net year-to-date returns of 14%, compared to the overall market’s nearly 23% increase. The fund achieved a 4% gain last quarter, based on the letter, still lagging behind the market’s performance.
Loeb suggests that his fund’s short-term performance has been affected due to its significant holdings outside large-cap technology stocks, which have been the leading performers in the narrow bull market. However, he expects the improvement in market breadth, which began in the third quarter, to continue, particularly under a Republican government. Loeb also assessed the U.S. economy as being in good condition, seeing “no evidence” of an impending recession. Additionally, he disclosed a new investment in the Danish freight company DSV.
