Stock playbook for Trump's second term: Top sector winners and losers
1 day ago
Investors brace for a bumpy ride as President-elect Donald Trump’s second term gets underway on Monday, bringing the promise of significant policy shifts — including lighter regulation and tax cuts.
Those two priorities have Wall Street upbeat, while cooling inflation and strong earnings have also fueled investor optimism. This past week, the S&P 500 (^GSPC) clocked its best weekly performance since the election. Since Nov. 5, the S&P 500 has climbed 3.6%.
Yet some areas of the market could be at risk, as Trump’s unpredictable approach is largely expected to trigger market volatility.
In recent weeks, I’ve spoken with several top CEOs and Wall Street analysts about what Trump 2.0 means for businesses and investors. Here’s what they told me about the incoming administration’s expected impact across various sectors.
Financials is viewed as a top trade as investors bet on looser regulation and increased M&A activity. Just this week, the nation’s largest banks reported a surge in corporate profits.
"There has been a meaningful shift in CEO confidence, particularly following the results of the US election," Goldman Sachs (GS) CEO David Solomon said on the bank’s earnings call. “It feels like we have a tailwind going into 2025."
Meanwhile, JPMorgan (JPM) CFO Jeremy Barnum cited a “significant amount of increase of optimism in the overall environment,” telling reporters following the bank’s earnings results that “we’re in an animal-spirits moment right now.”
“We need to have a more level, less volatile regulatory environment,” Chris Whalen, chairman of Whalen Global Advisors, told me on Yahoo Finance’s Morning Brief. “Having banks manage their business on whether or not [Senator] Elizabeth Warren is going to attack them or not is absurd. You can't run a business that way.”
Gabelli Funds portfolio manager Mac Sykes expects lighter oversight of the banking industry to be a catalyst for the group, telling Yahoo Finance that deregulation will “benefit the banks.”
“There was a 10% hit that was coming [from Basel III endgame], and that probably will go to neutral,” Sykes said. He also added that increased M&A within the sector will allow smaller players to take advantage of synergies, an outcome that’s being “underappreciated by investors.”
Goldman Sachs analyst Joe Ritchie told me last month that the industrial sector is gaining confidence after months of contraction, adding “several companies are expecting better growth in 2025 … It’s only a matter of time before it happens.”
HEICO (HEI) co-president Eric Mendelson is among the group’s business leaders who see Trump’s policies boosting investor confidence in the economy, creating a “very positive environment” for the industrial sector.
And Elon Musk’s influence on the incoming administration could be another catalyst. Robert Cardillo, chief strategist of Planet Labs (PL), told me last month at the Goldman Sachs Industrial and Materials conference that Musk’s impact will likely be “good news” for the sector.
Industry leaders and experts are expecting the incoming administration to create a supportive backdrop for the sector.
“It’s constructive in a lot of ways … The tax efforts I think are constructive. The regulatory environment I hope is also more constructive for the industry,” Southwest (LUV) CEO Bob Jordan told me last month.
And industry watchers are predicting significant changes to the air transportation and aerospace sector, including plans to scale back the Biden administration's consumer protection initiatives and reduce regulations affecting the commercial space and advanced air mobility industries, according to recent analysis from Pillsbury law firm’s aviation team.
“We anticipate seeing support from the Trump Administration for joint-ventures, mergers and/or acquisition efforts by smaller airlines to compete more effectively with the larger U.S. airlines,” Pillsbury’s Charles Donley, Edward Sauer, and Laura Jennings Ochoa wrote.
That sentiment is being echoed by top industry analysts.
“Between the new administration’s stance as well as some of the smaller airlines struggling, there's a better chance of M&A now … that's an upside for the group and definitely a higher likelihood in 2025 than what we've seen these past few years,” Raymond James’s Savanthi Syth told me.
Big Tech leaders are cozying up to President-elect Donald Trump due to his plans to peel back regulations and invest heavily in AI.
Amazon (AMZN) founder Jeff Bezos, Apple (AAPL) CEO Tim Cook, Alphabet (GOOGL) CEO Sundar Pichai, Meta (META) CEO Mark Zuckerberg, and Microsoft (MSFT) CEO Satya Nadella are among tech leaders who contributed funds to Trump’s inauguration campaign as Big Tech tries to win the backing of the new administration.
Wedbush’s Dan Ives expects the technology sector to be a big winner this year, predicting a “Goldilocks” scenario for Big Tech.
“We expect tech stocks to be up 25% in 2025 as the Street further digests a less regulatory spider web under Trump in the White House with Khan/FTC days in the rear-view mirror, stronger AI initiatives within the Beltway on the way, and a goldilocks foundation for Big Tech and Tesla looking into 2025 and beyond,” Ives wrote in a note to clients.
IBM (IBM) CEO Arvind Krishna told me at Yahoo Finance’s Invest conference that he’s hopeful the incoming Trump administration will foster “a lot more innovation and less regulation,” laying the groundwork for a more favorable deal environment.
“If we have more certainty on the outcome, then we are willing to lean into things like M&A. … If the regulatory process and antitrust are going to be more certain, that allows you to take more risk,” Krishna said.
Plans by the incoming administration to roll back the Biden administration’s EV policies on day one, along with threats of tariffs, pose a risk to the automotive sector.
Tom Donnelly, president and CEO of Mazda North American Operations, told me it’s “potentially” more difficult to do business under Trump given the unpredictability surrounding his administration and the potential for more tariffs. He told Yahoo Finance that Mazda has been “scenario planning” for months, which includes potentially shifting some of its production from Mexico to its plant in Alabama.
“Uncertainty isn’t beneficial,” Donnelly told me. “What's clear is no business in any industry can absorb the magnitude of what's being talked about here.”
Since Election Day, Trump has threatened a slew of tariffs, ranging from a gradual implementation to a 25% tariff on imports from Canada and Mexico and a 60% tariff on Chinese goods.
Tariffs on Canada and Mexico, in particular, are expected to be an overhang for the auto sector this year. Evercore’s Chris McNally remains “relatively cautious” on the entire legacy auto group until there’s a resolution on Trump’s tariff threats, warning of an earnings hit to some of the industry’s largest players.
“General Motors (GM) has the highest negative EPS exposure to a 25% Mexico Tariff in the whopping range of 45%-50% EPS hit if implemented,” McNally wrote in a note to clients earlier this month.
RBC’s Tom Narayan sees Trump’s “erratic” behavior as a risk to the industry and expects Trump’s threat of tariffs to “continue to pressure” auto stocks until the industry gains some clarity.
Discount retailers are among the stocks most at risk of tariffs, as the group relies heavily on Chinese imports.
For example, nearly a third of products sold at Boot Barn (BOOT) are produced in China, while 25% are produced in Mexico, according to recent analysis from Bank of America’s Christopher Nardone.
Dollar Tree (DLTR) CEO Michael Creedon noted on the company’s third quarter earnings call that the retailer has policies in place to mitigate risk associated with tariffs, including the ability to “eliminate the product altogether.”
Construction
Trump’s promise of mass deportations, along with tariffs, is a risk to the construction industry.
“Higher tariffs on Canada and Mexico and mass deportations of undocumented immigrants could increase costs for materials and labor. Higher tariffs on China could slow its economy, causing land developers to slow their investments,” S&P Global Ratings wrote in a recent note.
The team notes that softwood lumber, which is used to frame buildings, is often imported from Canada, while drywall and cement component gypsum is often imported from both Mexico and Canada.
And that sentiment was echoed by Realtor.com’s senior economist Joel Berner, who warned that higher costs will slow building activity.
“Policy initiatives of the incoming Trump administration, which has promised tariffs on imported goods that include construction materials and mass deportations that will impact builders’ labor forces, surely have come into play as builders slow down in terms of initiating new building projects,” Berner wrote.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email seanasmith@yahooinc.com.
