Materials Sector Set to Gain if Trump Exits the Paris Agreement

Will Donald Trump pull the US out of the Paris Agreement again? And what could that mean for Australia, especially for local companies? With Trump’s history, it's safe to assume he’ll likely exit the agreement once more, doubling down on fossil fuels.

While the US stands to benefit from cheaper energy, countries committed to the Paris Agreement could be left footing the bill for cleaner alternatives—a tough pill to swallow in today’s economic climate. Yet, this shift could play to Australia’s strengths and open massive opportunities in the materials sector, creating a potential windfall for investors interested in traditional energy sources.

Which stocks in the materials sector are set to benefit?

With Trump’s policies focused on boosting US energy independence through oil, gas, and coal production, American energy exports could shrink, leaving room for Australia to step in and fill global demand. Additionally, if the US reduces restrictions on fossil fuels, other countries might follow suit, easing the regulatory burden worldwide and giving Australian producers an edge in a more favourable global market. So which companies might see gains? Here are three Australian players worth watching.

Whitehaven Coal (ASX: WHC)

With Trump pushing for more fossil fuel use, demand for thermal coal could rise, giving Whitehaven a boost. After a staggering 1,230 per cent rally from its 2020 lows, the stock has found support around $6. If this level holds, there’s potential for a rally back up to $8.40. A breakout above this level could signal a longer-term uptrend if coal demand surges.

Santos (ASX: STO)

As one of Australia’s leading natural gas producers, Santos could benefit if the US turns its focus to LNG exports and natural gas as a transition fuel. The share price has been stuck in a narrow range of around $6.50 for nearly four years, but shifting energy policies might be the catalyst it needs to break out. If it rebounds toward $8 and breaks through, a sustained growth trend could follow.

Woodside Petroleum (ASX: WDS)

Woodside’s exposure to the US market positions it to benefit if Trump’s policies drive up American energy demand. The company’s recent strategic pivot toward the US aligns well with a renewed focus on traditional fossil fuels. Following a sharp 40 per cent decline in its share price from the November 2022 peak, Woodside is now trading around the $23 level—a crucial support zone that previously led to a major rally back in 2016. Watch this one closely for a potential rebound as a turnaround could be on the horizon.

So, while these companies are a must-watch right now, the big question is: will Australia seize this opportunity or stick to its green path? The energy landscape is shifting, and there’s a chance to make the most of it.

What were the best and worst-performing sectors last week?

The best-performing sectors included Information Technology, up 4.63 per cent, followed by Utilities, up 3.43 per cent and Consumer Discretionary, up 2.70 per cent. The worst-performing sectors included

Materials, down 5.56 per cent, followed by Consumer Staples, down 2.66 per cent and Healthcare, down 2.45 per cent.

The best performing stocks in the ASX top 100 included James Hardie, up 16.59 per cent, followed by Block Inc, up 15.01 per cent and Xero, up 9.94 per cent. The worst-performing stocks included Paladin Energy, down 25 per cent, followed by Mineral Resources, down 12.84 per cent, and Lynas Rare Earths, down 11.74 per cent.

What's next for the Australian stock market?

Sellers took control early last week, pushing the All Ordinaries Index down by over 1 per cent, but Friday saw buyers emerge to close the week slightly down 0.16 per cent. Interestingly, the index is beginning to show signs of repeating a pattern seen from April to July this year, where buyers and sellers were locked in a tug-of-war, resulting in a sideways market. Since 20 September, the weekly opening and closing prices have kept the All Ords within a narrow range of 8,323 to 8,551 points.

If downside activity is to play out this week, watch for key support at 8,300 points, which is expected to hold and prompt strong buying. If the market closes below 8,323, we could see further downside in the weeks ahead, with additional support around 8,100 points.

For the near term, it’s likely the index will remain range-bound, possibly breaking above 8,600 points if a Santa Rally builds momentum in December. The technology sector continues to lead, fuelled by gains in AI, semiconductors, and software stocks, buoyed by renewed optimism following Trump’s recent election victory. Yet, tech alone wasn’t enough to lift the broader market last week.

However, if you think the year’s opportunities are behind us, think again. With the Index producing a long-term yearly average of 13 per cent since 1900 and the All Ords currently up around 8 per cent, the market is still primed for one last push to close out the year on a high note.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.