A resounding Republican sweep of the White House, the Senate, and potentially the House of Representatives, has unleashed ‘Trump trades’ with stock markets and crypto prices ripping higher while bond yields climb in anticipation of looser fiscal policy.

With the result coming much faster and more decisively than many had expected, debt investors are now turning their attention to how the scale of this win will impact policymaking and regulation, and how those changes might affect the leveraged credit universe.

"The impact on leveraged finance is nuanced across sectors, and can vary within sub-sectors too,” said Grant Nachman, CIO and CEO at Shorecliff Asset Management. “We think it’s important not to apply blanket assumptions based on how prior Republican administrations have approached economic policy.”

We’ve already highlighted the big-ticket M&A deals and leveraged credits that could be affected by the election, and earlier today our UK team unpacked the implications of Trump 2.0 for the European leveraged finance market.

But the sheer size of the Republican shift (especially given that pre-election polls were forecasting a much closer race) is leading US investors to re-evaluate not just their positioning in high yield and leveraged loans but the broader outlook for rates, too.

"The sectors that investors are most likely to be re-underwriting probably include healthcare and consumer/retail,” said Nachman. “There may be positives for aerospace if Trump is serious about fixing the trade deficit. Despite its issues, Boeing remains among the largest US exporters. Defense, traditional energy, and energy-dependent sectors could also benefit from the election result.”

So far, expectations for rate cuts this year are unchanged, with a 25bp cut dialed in for this week and another 25bp cut expected before the end of the year. Beyond that, the picture gets fuzzier because of the possibility that Trump’s proposed tariffs could increase inflation and cause the Federal Reserve to change its approach to rate cuts. This is one of the factors driving 10-year Treasury yields around 15bps higher today.

Activity in the LevFin primary market is still quiet, although college memorabilia company Jostens held an investor call today for a $500m SSN due 2031 as part of a dividend recap and sports entertainment brand TKO Holdings announced a $2.75bn TLB refinancing. But bankers and buysiders are preparing for increased deal flow in the long term.

“We’ll eventually see more supply,” said Randall Parrish, head of public credit at Voya Investment Management. “One thing that will come of this is a pickup of M&A, but that’s a 2025 event.”

Make America M&A Again

As it stands, Wall Street is preparing for a much friendlier tax and business climate under Trump, especially with the Republicans looking to have control of at least two branches of government.

“Assuming the House goes Republican, we expect that a ‘Red Sweep’ outcome will play out in a similar fashion to the 2016 playbook, but to a lesser degree given a more mature economic backdrop and higher equity valuations,” said Jeff Schulze, head of economic and market strategy at ClearBridge Investments.

Companies looking to fund big M&A deals have noted the increased scrutiny from regulators ever since Joe Biden took the presidency in 2021. Under Lina Khan the FTC has flexed its antitrust muscles and slowed down dealmaking, and the conventional wisdom says oversight eases under Trump.

There’s some nuance to that, though. Vice President-elect JD Vance has praised staunch regulators such as Lina Khan in the past, and supported the idea of breaking up big tech companies. Other Republicans support that idea too.

Is it possible that the Trump administration could be pro-business at the same time as blocking big mergers like Dish/DirectTV? Sources speculated that this would play to Trump’s base rural constituencies, so maybe there’s something there; still, equities are hitting all-time highs today on the assumption that Trump will be a catalyst for more corporate growth, not less.

“This private equity ecosystem is not happy with overall exit multiples and they're waiting, but you can see the equity bounce today,” said Scott Roberts, president and senior managing partner at Belvedere Direct Lending Advisors.

“People are optimistic that there's more M&A to come, and that's important,” he added. “If there's more M&A next year, you're going to see more private equity guys unwinding their portfolio companies, which brings cash into the portfolios, which creates cash distributions for LPs, and it may get LPs a little more interested in the next fundraising.”

Energy impact is nuanced

Renewable energy companies risk a rollback in friendly policies, as Republicans eye a shift back towards traditional energy sources. Some analysts have predicted a rollback of the Inflation Reduction Act, which contained many provisions that were pro-renewables.

Case in point: solar company Sunnova Energy saw its senior notes due 2028 fall by nearly nine points to 76.96 today, while its senior notes due September 2026 dropped roughly eight points to 83.86 in the same time period.

“Sunnova is highly exposed to changes in the Inflation Reduction Act, as the company funds ~45% of its capital expenditures via investment tax credits received from the IRA,” wrote Jefferies analysts in a research note. “Any changes to funding provided by the IRA would cause significant cash outspend by Sunnova and send the structure lower.”

(A spokesperson for Sunnova did not return a request for comment. Also, for a primer on investment tax credits, check out this article).

At the same time, this is a free market so it’s not all about policy: while Trump may be less enthusiastic about solar and other renewables, companies and consumers are still demanding more renewable energy, said George Bory, chief investment strategist for fixed income, at Allspring.

And while a Trump administration is widely expected to be supportive of the E&P sector, oil prices are already relatively low. Further supply from increased drilling could actually hurt some energy companies if demand doesn’t rise alongside the increased production.

Still, investors expect Trump’s victory will more probably lead to new debt deals to fund further exploration and production.

“You will see more production of domestically generated oil and gas,” said Bory. “As a bond investor, it should be a good investment to finance over the next four years.”

Tariff impacts

Trump is expected to bring a protectionist mindset to trade policy. One fairly instant impact of that could be tariffs (as we learned in the first Trump presidency) but there’s also a longer term question about what these kind of isolationist policies will do to US growth more broadly.

“Higher tariffs are an isolationist strategy that could crimp global growth and may ultimately impact US growth,” said Bory at Allspring. “But it's way too early to say with any degree of conviction if that's going to happen, and if it does, what are the downstream implications.”

Tariffs stand to especially impact businesses tied to retail, particularly those that import products from countries like China. For example, analysts at Jefferies indicated that Michaels Stores, the arts and crafts retailer, could suffer under Trump.

The fear of potential tariffs has driven Michaels’ unsecured notes around 15 points lower since the summer, with investors expecting another five-point decline if Trump wins, the analysts stated (that report was published before the result was clear).

As it stands, the company’s senior notes due 2028 have dropped by more than one point to 71.55 since the election, while its senior notes due 2029 have declined by three points to 50.72 over the same time period. A Michaels spokesperson did not respond to a request for comment.

The auto sector could also be hit, depending on how punitive the Trump administration is on auto parts shipped from Mexico and Canada.

There are also sectors that could benefit from isolationism: domestic metals and mining companies may have an advantage, as would paper and packaging companies that produce in the US, said investors. Transportation, gaming, and leisure credits could also see a boost if there are new personal tax cuts.

Private prisons

As we mentioned in our election tracker, the private prison sector has plenty to gain from a Trump presidency and his stance on border policy. Unsurprisingly, stock prices for both GEO Group and CoreCivic rose on the morning of 6 November.

GEO Group’s senior secured notes due 2029 popped by nearly two points to 105.9 following Trump’s win, while its senior notes due 2031 were up by around two points to 108.46. Debt trading levels for CoreCivic’s senior notes due April 2029 and senior notes due October 2027 were up by nearly a point.

Earlier this decade, investor demand for debt tied to private prisons was starting to come under pressure because of ESG concerns. But ESG has lost steam in recent years, helping companies like CoreCivic and commissary operator TKC Holdings access capital markets this year. Trump is not exactly a big fan of ESG, so it’s unlikely he will reverse that tide.

Management at both GEO Group and CoreCivic may offer additional color on how a Trump presidency could positively impact them when they report Q3 earnings on 7 November. CoreCivic declined to comment, and a GEO Group representative did not return a request for comment.

Telecoms

The outlook for telecoms industry remains uncertain as Republican mega-donor and Starlink owner Elon Musk could potentially take on a more prominent role in shaping Trump’s government and policy decisions. This may have future ramifications for Viasat, which is facing increasing competition from Starlink as a provider of inflight wifi.

“Given the highly visible relationship between Elon Musk and Donald Trump, the structure will continue to be sensitive to election outcomes,” said the Jefferies analysts.

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