Tobacco Stocks Rally

Tobacco stocks rose in the wake of Donald Trump’s victory in the U.S. presidential election, reports The Wall Street Journal.  

BAT stocks were up 4 percent this morning; its Reynolds American subsidiary was a large donor to the Make America Great Again action committee, which supported the former president’s bid for reelection. Reynolds has been pushing back against the Biden administration’s proposed menthol ban, which was delayed earlier this year. Under another Trump administration, it is likely that a menthol ban would be completely dismantled.

BAT, Altria and Imperial Brands all have sizable U.S. menthol businesses as the products make up more than a third of the U.S. cigarette market by volume.

Another Trump administration may also lead to a crackdown on illicit imports of disposable vapes, which primarily come from China. During his first term as president, Trump enthusiastically erected barriers to Chinese imports Such measures could boost some tobacco companies’ e-cigarette brands.

Expectations that a Trump presidency will strengthen the dollar, however, could be troublesome for Philip Morris International as the multinational makes around 90 percent of sales in other, primarily emerging market, currencies. A possible increase in inflation could also harm tobacco stocks since they are heavily exposed to price-sensitive, low-income consumers.