Sectors poised for growth under Trump’s administration
One of the most frequently asked questions by investors following Trump’s election victory is: what sectors will do well? While much remains unknowable about Trump’s second term, his “promises made, promises kept” statement during his victory speech suggests not all is a mystery.
While this Trump presidency may be different to the first, we can make some assumptions about which sectors could outperform. To do this, one must examine the sectors that benefited from the Republican Party’s previous policies and Trump’s stated agendas.
What follows is an executive summary of sectors that could potentially do well under a Trump administration:
Energy:
Oil and gas: Trump’s administration previously rolled back regulations on fossil fuels and withdrew from the Paris Agreement. A renewed focus on domestic energy production could benefit U.S. oil and gas companies.
Coal:
Efforts to revive the coal industry might provide a temporary boost to coal mining companies.
Defence and aerospace:
Increased defence spending was a hallmark of Trump’s previous term. Due to higher government contracts, companies manufacturing defence equipment and technology could see growth.
Financial services:
Banks, financial Institutions, and credit card companies could outperform. Deregulation efforts might resume, potentially benefiting large banks and financial firms by reducing compliance costs and restrictions on certain activities.
Construction and infrastructure:
Trump’s emphasis on rebuilding America’s infrastructure could lead to increased government spending, benefiting construction companies and materials suppliers.
Domestic manufacturing and industrial:
Policies to bring manufacturing jobs back to the U.S., including tariffs on imported goods, could boost domestic manufacturing companies.
Pharmaceuticals and biotechnology:
While healthcare policies can be complex, certain deregulations might favour large pharmaceutical companies, potentially accelerating drug approvals and reducing operational hurdles.
Telecommunications:
Support for expanding 5G infrastructure and less stringent regulations might benefit telecom companies.
Cybersecurity:
Increased focus on national security could lead to more government contracts for cybersecurity firms.
Commercial real estate:
Tax reforms and economic policies favouring businesses might stimulate commercial real estate market growth.
Travel:
Cruise companies benefit from the U.S. doing well, as American passengers represent their biggest market. A stronger U.S. dollar will make international travel cheaper for U.S. citizens.
Other considerations
Trade policies:
Trump’s approach to international trade, including tariffs and renegotiating trade agreements, could have mixed effects. While some domestic industries might benefit, others reliant on global supply chains could face challenges.
Regulatory environment:
A general trend toward deregulation might reduce business costs across various sectors. But lower regulation also introduces the possibility of new risks for businesses (for example from unregulated practices and competition, and monopoly behaviour) that investors should carefully assess.
Market volatility:
Political uncertainty, particularly shifts in foreign policy could lead to increased market volatility, affecting investment returns unpredictably.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
