ChatGPT says these FTSE 100 stocks could benefit from the Trump presidency

FTSE 100 stocks aren’t the obvious beneficiaries of a Trump presidency, but artificial intelligence believes there are several that could prosper.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

To date, the FTSE 100 — the index tracking the performance of the UK’s largest 100 stocks — has largely shrugged off the incoming president’s early policy announcements. However, that’s not to say we won’t see more movement as Donald Trump’s term unfolds, especially if the UK finds itself the target of American tariffs.

And with this in mind I decided to ask ChatGPT, considering its IQ is already higher than my own, which FTSE 100 stocks could benefit from Trump’s policies. The platform provided me with four answers, Ashtead Group, Sage Group, BAE Systems (LSE:BA), and Rolls-Royce (LSE:RR). Today I’m going to focus on the latter two.

Trump’s push on defence spending

ChatGPT selected BAE Systems and Rolls-Royce because they’re the two largest defence contractors in the UK. That’s important because Trump wants the US and its allies to spend more on defence. In fact, he’s called for NATO members to increase their defence spending to 5% of GDP. That’s more than doubling the current 2% target.

Should you invest £1,000 in BAE Systems right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

See the 6 stocks

This demand has caused concern among European allies, with many considering it unrealistic given their economic constraints. But while Trump’s push is largely seen as a negotiating target, potentially aiming for a compromise around 3.5%, this would still represent a significant requirement for NATO members to increase defence spending. The ultimate winners here will likely be the defence contractors.

What’s more, UK-based contractors could prosper more than their European counterparts because they’re exempt from ITAR regulations. This exemption, effective since August 2024, allows for streamlined defence trade among AUKUS nations (Australia, UK, and US). UK companies in the Authorised User Community can now operate without US ITAR licenses for specified controlled articles and services. This should reduce administrative burdens and lead times.

Is Rolls-Royce a good investment?

Rolls-Royce is a quality business that has been revitalised in recent years. The company’s three main business units — civil aerospace, defence, and power systems — are all thriving and contribute to a very healthy earnings trajectory.

Interestingly the stock, despite its meteoric rise, is still trading at a discount to its American counterpart GE. While potentially resurgent inflation from Trump’s policy may have a negative impact on demand for air travel — Rolls earns a lot from service-related flying hours of its engines — it’s definitely a stock worthy of much consideration. I would consider buying more but my holding’s already substantial relative to my portfolio.

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Is BAE Systems one as well?

The BAE share price is already elevated versus historical levels. And much of these gains happened at the start of Russia’s war in Ukraine. Rather than benefitting from demand for armour and ammunition, the company prospers when nations sign up to long-running defence programmes, like Tempest and AUKUS.

Created with Highcharts 11.4.3BAE Systems PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

One risk is that it doesn’t trade with the normal British discount that we’ve come to expect — it trades with similar valuation multiples to its American counterparts. What’s more, the expected earnings growth rate isn’t as strong as Rolls-Royce. I’ve owned it, sold it too soon, and don’t expect to buy it in the near term.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has position in Rolls-Royce Plc. The Motley Fool UK has recommended Ashtead Group Plc, BAE Systems, Rolls-Royce Plc, and Sage Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

Down 38% over 12 months, is the BP share price the bargain of 2025?

BP’s share price has experienced a massive decline over the last year. Could there be a major opportunity here for…

Read more »

Investing Articles

2 FTSE 100 dividend shares to consider as global recession looms!

FTSE 100 investors need to tread carefully if they're to avoid dividend disappointment in 2025. Here are two top shares…

Read more »

Investing Articles

This FTSE 100 hidden gem now yields a stunning 9.9% a year, so should I buy more?

This relatively obscure FTSE 100 savings and investment giant now has a super-high yield, and its share price also looks…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

Near a 1-year low around 66p, is Vodafone’s share price too cheap for me to ignore?

Vodafone’s share price is near its 12-month traded low, which means an opportunity to buy the stock on the cheap.…

Read more »

Investing Articles

Prediction: 12 months from now, the easyJet share price could turn £5,000 into…

The easyJet share price appears to be significantly undervalued as investors fixate on short-term woes rather than long-term potential gains.

Read more »

Investing Articles

Prediction: 12 months from now, the Vodafone share price could turn £5,000 into…

Could the Vodafone share price jump by 30% over the next 12 months? Zaven Boyrazian takes a closer look at…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Prediction: 12 months from now, the Aviva share price could turn £5,000 into…

The Aviva share price tumbled in the tariff-induced market turmoil, but could this have created a new buying opportunity for…

Read more »

Investing Articles

Prediction: 12 months from now, the BAE share price could turn £5,000 into…

With EU defence spending on the rise, the BAE Systems' share price could surge… right? Not necessarily. Zaven Boyrazian digs…

Read more »