Some advertising companies have dropped in stock price upon the election results nominating Donald Trump as President of the United States. These two companies have experienced a decrease in their stock price of roughly two percent since the election results.
Two major international players in the advertising industry, WPP and Publicis have seen major drops in their stock post election. The logic behind this is that these companies will experience lower income in United States as a result of a downward pressure on the US economy after the election results.
Trump is expected to push for policies that will lead to potential international trade wars with China and Mexico, and may seek to eliminate the NAFTA trade agreement as well as plans for a similar Transpacific partnership. On the campaign trail Trump was particularly critical of these trade deals as eroding American economic strength and eliminating manufacturing jobs in the United States. If this happens, many companies are thought to lower the amount that they spend on their advertising budgets.
In addition, Trump’s policies are thought likely to contribute to a weaker American dollar. The US dollar has been particularly strong recently as other countries have experienced and even pushed for their currency eroding. Advertising agencies like WPP and Publicis are likely to experience lower revenue when translated into their base currencies. WPP is located in the UK and increased its stock value after Brexit dropped the British pound. Publicis is a French company.
WPP earns about 35% of their revenue in the US while Publicis earns half of their money in the American market. Both of these companies own entities that provide for significant amounts of both traditional advertising as well as online marketing and advertising services through their subsidiaries Mindshare and Razorfish. These entities compete against two major American advertising entities Omnicom and Interpublic.
Whether these stock moves downward are prescient or exaggerated will be the focus of policies that have yet to be put in place. Many market observers believe that Trump was stating policies that he is unlikely to put in place thereby leading to exaggerated stock moves for and against certain stocks that may be different for future results thereby leading to an opportunity in these major advertising and online marketing stocks.