Yet in spite of these unknowns, Trump reclaiming the White House paves the way for a multitrillion-dollar investment to deliver for Wall Street.

I know what you’re probably thinking, and I’m not talking about artificial intelligence (AI). Although the analysts at PwC believe AI will add $15.7 trillion to the global economy by 2030, it’s not yet clear if the incoming Trump administration will aid or hurt the AI revolution.

While most everything is speculation at this point, one of the few aspects of a Trump presidency that’s effectively a given is that the corporate income tax rate isn’t going to climb. During Trump’s first term, his flagship Tax Cuts and Jobs Act (TCJA) permanently reduced the peak corporate income tax rate to 21%, which is the lowest it’s been since the late 1930s. Though Democratic Party presidential nominee Kamala Harris had proposed increasing the corporate income tax rate by 33%, this is now off the table with a Trump victory.

If the corporate income tax rate remains at eight-decade lows, there’s a lot Wall Street’s most-influential businesses may be able to do with their extra cash. There’s the possibility of added hiring, increased research and development, and even acquisitions.

However, the biggest impact of a Trump presidency, in my view, will be seen in stock buybacks.

Prior to the passage of the TCJA, quarterly-stock repurchases by S&P 500 companies had regularly vacillated between $100 billion and $150 billion, in aggregate, between 2011 and 2017. But once the TCJA lowered the corporate income tax rate from 35% in 2017 to the current 21% in 2018, it became a green light for America’s most-influential businesses to repurchase their stock.

Excluding the very early stages of the COVID-19 pandemic, which saw some businesses halt or substantially pare back their share-repurchase programs, quarterly-buyback activity for S&P 500 companies has regularly ranged from $200 billion to more than $250 billion per quarter. In short, buyback activity has grown by 50% to 70% on a pre-versus-post TCJA basis.

Admittedly, this is a correlative analysis and doesn’t guarantee that businesses will continue dumping copious amounts of cash into stock buybacks during President-Elect Trump’s upcoming term. Then again, history has a way of rhyming on Wall Street.

According to data from S&P Global, S&P 500 companies bought back $235.9 billion worth of their own stock during the June-ended quarter, which works out to more than $943 billion on an annual run-rate basis. Over the trailing-10-year period (ended June 30, 2024), S&P 500 components have repurchased $7.03 trillion worth of their company’s stock, led by Apple ($687.2 billion), Alphabet ($271.4 billion), Microsoft ($195 billion), and Meta Platforms ($173.8 billion).

The reason buybacks are so popular is because they can help boost a company’s earnings per share (EPS) and make its stock more fundamentally attractive to investors. Companies with steady or growing net income and a declining outstanding share count will see their EPS grow over time. Apple, for instance, has reduced its outstanding share count by more than 42%, which has had a noticeably positive impact on its EPS.

With potentially $1 trillion or more in buybacks being undertaken annually by S&P 500 companies during Trump’s second term, there’s a real possibility of this multitrillion-dollar investment sending stocks to new heights.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, Microsoft, and S&P Global. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Prediction: President-Elect Donald Trump Reclaiming the White House Paves the Way for This Multitrillion-Dollar Investment to Send Stocks Soaring was originally published by The Motley Fool