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What happened
Shares of railroad Kansas City Southern (KSU) fell as much as 14.3% today after the election shook up companies tied to trade. As of 3 p.m. EST shares were down 10.6%.
So what
There's concern in the market that the U.S. will begin embarking on a trade war under the Trump administration. And if that happens it will reduce trade and demand for rail services, particularly to Mexico, where Kansas City Southern has exposure.
Because of the election results, Aegis Capital downgraded the stock from a buy rating to hold and lowered their price target by $10 to $95 per share.
Now what
The slide in Kansas City Southern's shares today is all about speculation of a future trade war that isn't yet happening. And while such a trade war may be a higher risk, it shouldn't be assumed that it's certain to take place. For investors willing to look past a single election to the long-term value in railroads moving goods across the country, I think this is a buying opportunity. But if a trade war does erupt between the U.S. and Mexico, it could be a rocky road.
