With many FTSE 100 companies drawing revenue from abroad, the US election could have a significant impact on UK shares. With Trump and the Republican Party soon to be back in power, I’m looking to see which of our local stocks could benefit.

Markets are already pricing in higher inflation, which could keep interest rates up, suppressing bonds and non-interest-earning commodities like metals. But since Trump has been favourable regarding company tax in the past, many US stocks have already enjoyed a boost.

Other policies related to infrastructure and defence may also help UK-based companies. Here are two that I think could gain from their exposure to the US economy and that I feel are worthy of further research.

Ashtead Group

Ashtead Group (LSE: AHT) is an equipment hire firm that accrues about 95% of its revenue from the US via its subsidiary Sunbelt. The share price is up 5% since the election result was announced last week.

Trump has mentioned plans to open more federal land for housing and loosen regulations to make building cheaper and easier. This would likely increase demand for Sunbelt’s construction rental equipment.

Moreover, with Trump shying away from foreign imports, it’s well-positioned to benefit from fresh investment in US infrastructure — particularly semiconductor plants. 

There’s some risk to the stock given the fact it operates in cyclical markets. This means investors may need to endure periods of slow growth or decline. It also faces strong competition from the larger local outfit, United Rentals.

Ashtead’s share price is currently trading near a three-year high with a price-to-earnings (P/E) ratio of 22.98. It also has a somewhat strained debt-to-equity ratio of 108%. Those factors could limit further growth in the short term.

Still, its net profit margin is almost 15% and return on equity (ROE) is forecast to be 22.8% in three years, so I see long-term potential in the company.

BAE Systems

With Trump suggesting a possible increase in military spending, the defence sector could benefit. BAE Systems (LSE: BA.) may be UK-based but 42% of its revenue came from the US last year. Since the election, the shares are up 8% as I write.

It’s known to be a good dividend payer with reliable and steadily increasing payments. The current yield of 2.2% is forecast to rise to 2.8% in the next few years and the payout ratio of 51% is more than sustainable.

We’ve already seen the business grow in the past few years as the Russia-Ukraine conflict sadly drags on. To expedite a resolution, NATO chief Mark Rutte has urged members to increase defence spending beyond the current target of 2% of GDP. Trump has echoed this sentiment.

Yet the threat of supply chain issues and cost inflation is an ever-present risk for aerospace and defence businesses. BAE was among several affected by this during and after Covid. Naturally, demand could also decrease if global conflicts subside and defence spending tapers off, which could lead to profit-taking and share price decreases.

Overall, the company is a global leader with business elements that extend beyond just defence. Historically, it’s performed well even during tough times and I imagine it will continue to do so over the long term.