European investors worried about former President Trump’s potential return to the White House have a number of options, Barclays strategists said. The bank said European stocks could face significant headwinds if Trump wins the presidency, mainly due to the possibility of trade tariffs and protectionist policies. There is already a risk premium in European markets ahead of a potential Trump victory, and the investment bank believes current valuations may not reflect the full impact. “The possibility of bypassing Congress if Trump wins increases the risk of tariff implementation,” Barclays strategists led by Emmanuel Cau said in a note to clients on Oct. 23. “Compared to the status quo under a Harris win. , Trump’s victory may have a broader and more discriminating impact on the market. The investment bank emphasized that it is independent and does not support or endorse any presidential candidates in the election. A disclaimer accompanying the research report reads: ” Our research also does not attempt to predict whether any particular candidate will be elected. The chart below shows the stocks Barlcays identified as most vulnerable to potential tariffs and have lagged the broader market by nearly 15% since early April. Conversely, Barclays said the above-mentioned Stocks Could Get a Boost Hedging Strategies For investors looking to protect their portfolios from downside risks, Barclays recommends several hedging strategies such as the European Stoxx 50 Index or the German DAX. Put options on European indices. Put options are derivatives – whose value is derived from the value of the underlying asset – and give the owner the right to sell a stock at a given price within a given period of time, recommends Barclays. Put options will become more valuable, providing protection against market volatility, the strategists said: “With relatively low equity volatility and strong put skew, we like to buy SX5E or DAX put spreads. Hedging against a Trump victory, we believe this could further damage European assets (equities and the euro). Barclays economists also estimate that if Trump implements his proposed 10% global tariffs and 60% tariffs on Chinese goods. , euro area GDP may take a 0.7% hit, although this impact is smaller than expected for China and the United States, but they warned that the impact may be more lasting given Europe’s relatively open economy. , Barclays strategists warned that investors will have nowhere to hide. “While Europe may be hardest hit, we don’t think U.S. stocks are immune. However, Trump’s election as president is not all bad news for Europe. Strategists also pointed out that if the former president regains control of the White House, European markets will face upside. “Although it is very hypothetical at this stage,” the strategists noted. But if Trump wins the presidential election, one potential positive catalyst for Europe to look forward to is his approach to the Russia-Ukraine war,” suggesting that any move to end the conflict could reduce the risk premiums currently affecting European assets. — CNBC Michael Bloom contributed reporting.
