How Trump’s policies may affect investors in these 8 market sectors

As Inauguration Day nears, investors try to unravel what booms or busts lay ahead under President-elect Donald Trump.

Trump’s campaign guarantees — from tariffs to mass deportations, tax cuts and deregulation — and his picks to steer federal agencies suggest each risks and rewards for various investment sectors, in line with market experts.  

Republican control of each chambers of Congress may grant Trump greater leeway to enact his pledges, experts said. Nevertheless, their scope and timing is removed from clear.

“There’s a lot uncertainty without delay,” said Jeremy Goldberg, a licensed financial planner, portfolio manager and research analyst at Skilled Advisory Services, which ranked No. 37 on CNBC’s annual Financial Advisor 100 list.

“I would not be making large bets a method or one other,” Goldberg said.

Past market results show why it’s difficult to predict the sectors that will win or lose under a latest president, in line with Larry Adam, chief investment officer at Raymond James.

When Trump was elected in 2016, financials, industrials and energy outperformed the S&P 500 in the primary week. Nevertheless, for the remaining three years and 51 weeks, those self same sectors significantly underperformed, Adam said.

“The market is understood to have these knee-jerk reactions attempting to anticipate where things go in a short time, but they do not necessarily last,” Adam said.

What’s more, sectors which are expected to do well or badly based on a president’s policies have sometimes gone the alternative way, in line with Adam.

For instance, the energy sector was down by 8.4% during Trump’s first administration, despite deregulation, record oil production and an increase in oil prices. Yet the energy sector climbed 22.9% under Biden as of Nov. 19, despite the administration’s push for renewables and sustainability.

For that reason, Raymond James ranks politics eighth for its potential impact on sectors. The seven aspects which have more influence, in line with the firm, are economic growth, fundamentals, monetary policy, rates of interest and inflation, valuations, sentiment and company activity.

Here’s how Trump’s policy stances could influence eight sectors: autos, banks, constructing materials and construction, cryptocurrency, energy, health care, retail and technology.

His administration may attempt to roll back regulations comparable to a Biden-era tailpipe-emissions rule expected to push broader adoption of EVs and hybrids. He also intends to kill consumer EV tax credits price as much as $7,500 — although states comparable to California may attempt to enact their very own EV rebates, blunting the impact.

Losing the federal credit would make EVs more costly, driving down sales and maybe making “per unit economics even less favorable” for automakers, John Murphy, a research analyst at Bank of America Securities, wrote in a Nov. 21 research note.

Some corporations seem well-positioned, though: Ford Motor, for instance, “has a healthy pipeline of hybrid vehicles in addition to traditional [internal combustion engine] vehicles to complement the EV offerings,” Murphy wrote.

Tariffs and trade conflict pose threats to the auto industry, for the reason that U.S. relies heavily on other nations to fabricate cars and parts, said Callie Cox, chief market strategist at Ritholtz Wealth Management.

They “could affect the associated fee and availability of cars we see within the U.S. market,” Cox said.

Economists expect tariffs and other Trump policies to be inflationary.

In that case, the Federal Reserve can have to maintain rates of interest higher for longer than anticipated. Higher borrowing costs may weigh on consumers’ desire or ability to purchase cars, Cox said.

Nevertheless, lower EV production might be a boon for corporations that manufacture traditional gasoline cars, experts said.

Trump has also called for a “drill, baby, drill” approach to grease production. Greater supply could reduce gas prices, supporting demand for gas vehicles, experts said. But trade wars and sanctions on Iran and Venezuela could have the alternative impact, too.

— Greg Iacurci

Trump’s first administration eased certain regulations for banking rules, fintech firms and financial startups.

Likewise, Trump’s second term is predicted to usher in lighter financial regulations.

That will help bolster profitability within the sector, and subsequently stock prices, said Brian Spinelli, co-chief investment officer at Halbert Hargrove in Long Beach, California, which is No. 54 on the 2024 CNBC FA 100 list.

The housing market has been “frozen” lately by high mortgage rates, said Cox, of Ritholtz.

Trump has called for opening public land to builders and creating tax incentives for homebuyers, without providing much detail.

Housing policy will probably be “one among the most-watched initiatives coming out of the following administration,” Cox said. “We have not gotten quite a lot of clarity on that front.”

“If we see realistic and well-thought-out policies, you possibly can see real estate stocks and related stocks” comparable to real estate investment trusts, home improvement retailers and residential builders respond well, Cox said.

— Greg Iacurci

Trump’s election has brought a latest bullishness to cryptocurrencies, with bitcoin nearing a latest $100,000 benchmark before its recent runup ended.

Yet financial advisors are hesitant, with only about 2.6% recommending crypto to their clients, an April survey from Cerulli Associates found. Roughly 12.1% said they’d be willing to make use of it or discuss it based on the client’s preference. Still, 58.9% of advisors said they don’t expect to ever use cryptocurrency with clients.

“The No. 1 reason why advisors aren’t investing in cryptocurrency on behalf of their clients is that they don’t think it’s suitable for client portfolios,” said Matt Apkarian, associate director in Cerulli’s product development practice.

Even for advisors who do expect they might use crypto sooner or later, it’s “wait and see,” particularly regarding how the regulatory environment plays out, Apkarian said.

Nevertheless, investors are showing interest in cryptocurrency, with 90% of advisors receiving questions on the topic, in line with research from Christina Lynn, a licensed financial planner and practice management consultant at Mariner Wealth Advisors.

For those investors, exchange-traded funds are a great beginning, Lynn said, since there’s less likelihood of falling victim to one among crypto’s pitfalls comparable to scams or losing the keys, the unique alphanumeric codes attached to the investments. Because crypto will be more volatile, it is best not to take a position any money you expect you’ll have to pay for near-term goals, she said.

Investors would even be clever to consider cryptocurrency like an alternate investment and limit the allocation to 1% to five% of their overall portfolio, Lynn said.

“You needn’t have quite a lot of this to have it go a great distance,” Lynn said.

— Lorie Konish

As of Nov. 19, energy has been the top-performing sector under President Joe Biden, with a 22.9% gain, even with the administration’s push for renewables and sustainability, in line with Raymond James.

Yet it stays to be seen whether that performance can proceed under Trump, who has advocated for more oil, gas and coal production. The outlook for the sector could change if Trump acts on a campaign threat to repeal the Inflation Reduction Act, a law enacted under Biden that features clean energy incentives.

RFK is a distinguished vaccine skeptic, which can bode sick for big vaccine makers comparable to Merck, Pfizer and Moderna, said David Weinstein, a portfolio manager and senior vice chairman at Dana Investment Advisors, No. 4 on CNBC’s annual FA 100 rating.

Vivek Ramaswamy, a former biotech executive whom Trump appointed as co-head of a latest advisory panel called the “Department of Government Efficiency,” has called for streamlined drug approvals. But Kennedy has advocated for more oversight.

“There is a real dichotomy here,” Weinstein said.

“Where will we find yourself? Possibly where we’re without delay,” he added.

— Greg Iacurci

Tax cuts may boost consumers’ discretionary income, which could be a boon for corporations selling consumer electronics, clothes, luxury goods and other items, Goldberg said.

However, there is a “high probability” of tariffs, Weinstein said.

Retailers would likely pass on no less than a few of that additional cost to consumers, experts said.

All physical goods, from apparel to footwear, tools and appliances are in danger from tariffs, Weinstein said. Tariff impact would rely on how the policies are structured.

Home Depot CEO and President Ted Decker said Nov. 12 through the firm’s third-quarter earnings call that the corporate sources greater than half its goods from the U.S. and North America, but “there definitely will probably be an impact.”

“Whatever happens in tariffs will probably be an industrywide impact,” Decker said. “It won’t discriminate against different retailers and distributors who’re importing goods.”

It’s a great idea for investors to own “top quality” retailers without quite a lot of debt and with diversified inventory sources, Goldberg said. He cited TJX Corporations, which owns stores including TJ Maxx, Marshalls and HomeGoods, for instance.

“Direct imports are a small portion of [its] business and TJX sources from quite a lot of countries outside of China,” Lorraine Hutchinson, a Bank of America Securities research analyst, wrote in a Nov. 21 note.

Deregulation could also be positive for smaller retailers and franchises, which are likely to be more sensitive to labor laws and environmental and compliance costs, Goldberg said.

— Greg Iacurci

The technology sector continued its strong run in 2024, thanks largely to the Magnificent Seven — Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla.

Even broadly diversified investors may find it difficult to flee those names, as they’re among the many top weighted corporations within the S&P 500 index.

Information technology — which incorporates all those stocks except Amazon and Google parent Alphabet — comprises the biggest sector within the S&P 500 index, with greater than 31%.

Trump is poised to have an influence on looming antitrust issues, amid considerations as as to if Google’s influence on online search ought to be limited.

Any tariffs put in place might also prompt some sales to say no or the associated fee of raw materials to go up, said Rea of Salem Investment Counselors.

Nevertheless, Rea said his firm continues to have a “pretty heavy” tech allocation, with strong expectations for generative artificial intelligence. Nevertheless, the firm doesn’t own Tesla, as a result of its expensive valuation, and has recently been selling software company Palantir, a winning stock that will have gotten ahead of itself, he said.

Technology valuations are trading well into the high double digits on a price-to-earnings basis, which regularly signals forward returns will decline, in line with Halbert Hargrove’s Spinelli.

Consequently, prospective investors who are available in now would principally be buying high, he said.

“If you happen to think you are going to get the identical double-digit returns in the following five years, sure, it could occur on a one-year basis,” Spinelli said. “But your probabilities historically have been that your returns come down.”

— Lorie Konish