A second Trump presidency could usher in a range of policies with direct impacts on key sectors of the U.S. economy. Building on themes from his first term, such as tax cuts, deregulation, and pro-business stances, Trump has proposed an agenda that could drive substantial growth across multiple industries. The broad U.S. stock market, large-cap financials, technology, cryptocurrency, and cybersecurity are among the sectors that may benefit most. With planned corporate tax reductions, regulatory rollbacks, and focused investments in sectors like infrastructure and defense, Trump aims to create an environment favouring corporate profitability and market expansion.

This overview delves into how specific sectors could thrive under such an agenda, offering insights into potential market trends and investment opportunities for the years ahead.

1. The Broad U.S. Stock Market (ESPX)

During Trump’s first term from January 2017 to January 2021, the S&P 500 experienced significant growth driven by several key policies and economic factors.

Trump’s Tax Cuts and Jobs Act of 2017, which lowered the corporate tax rate from 35% to 21%, significantly boosted corporate profits and investor confidence, fueling the equity returns. The S&P 500 returned 81.28% from January 1 2017, to January 1, 20211. Additionally, the administration’s deregulation efforts, particularly in the financial and energy sectors, created a more business-friendly environment, further enhancing corporate earnings and market optimism. This term, he plans to cut the corporate tax rate further, to 15%.

These tax cuts are expected to enhance corporate profitability, thereby boosting stock prices. Additionally, plans to ease regulations across various sectors may lower operational costs for companies, leading to higher earnings and increased investor confidence. Commitments to substantial infrastructure projects are also expected to stimulate economic growth, benefiting sectors such as construction and manufacturing. Furthermore, policies favouring fossil fuel production could boost energy companies, contributing positively to the overall market. Collectively, these factors create an environment conducive to stock market growth, with the S&P 500 likely to reflect these positive developments.

During his 2024 campaign, Donald Trump has expressed frustration with the Federal Trade Commission (FTC) and current antitrust regulations. He has signaled a shift toward a more business-friendly approach, indicating intentions to reduce regulatory burdens. This could involve appointing FTC leadership less inclined toward aggressive antitrust enforcement, potentially leading to a more lenient stance on mergers and acquisitions (M&A) and facilitating increased merger activity.

Trump’s commitment to cutting regulation and bureaucracy has been highlighted by his association with Elon Musk who he intends to involve in these efforts. Musk has significant incentive to make the government more business friendly along with a reputation for driving efficiency and taking action. A less constrictive regulatory environment is likely to benefit corporate earnings across all sectors.

Overall, Trump has pledged to lowering corporate taxes and breaking down regulations to encourage a business-friendly environment. These two factors generally impact stock prices positively.

2. U.S. Large Cap Financials (CALL)

Under a second Trump administration, large U.S. banks are expected to benefit from several supportive policy initiatives.

First, the administration’s plans for deregulation could foster a more lenient regulatory environment. By replacing key figures like SEC Chair Gary Gensler with pro-industry leaders, banks may see reduced compliance costs, potentially boosting profitability.

Second, proposed corporate tax cuts could enhance banks’ after-tax earnings, directly improving net income and return on equity, which may lead to higher stock valuations.

Third, Trump’s policies aimed at stimulating economic growth—such as infrastructure spending and tax cuts—could increase lending opportunities. A stronger economy may also prompt the Federal Reserve to adjust interest rates, potentially widening lending-deposit spreads and further enhancing bank profitability.

Lastly, the financial sector has shown positive reactions to pro-business policies, as evidenced by the surge in banking stocks following Trump’s election victory, signaling investor optimism for a favourable environment.

Also worth noting is the change in the Senate to Republican control. A cloud of uncertainty has hung over the banking system as a result of Democrat control of the Senate Banking, Housing, and Urban Affairs Committee. Notably Senator Elizabeth Warren an influential member of this committee and outspoken opponent to the crypto industry used the committee’s influence to restrict access to banking services for crypto exchanges. This was a key factor in the closing of several banks during the regional bank crisis in March 2023. Removal of this political risk factor could foster a healthier environment for the entire industry.

In summary, deregulation, tax cuts, economic growth policies, and market confidence could create a conducive climate for large U.S. banks under a second Trump term.

3. Technology Sector (QQQT, TECH)

Donald Trump’s presidency is anticipated to positively influence the technology sector through several key policies and actions.

His planned tax reductions and deregulation measures are expected to enhance profitability for technology companies by lowering costs and reducing compliance burdens. Such an environment fosters innovation and growth within the tech sector.

Additionally, the administration plans to prioritize the United States’ position in artificial intelligence, with significant AI initiatives anticipated, particularly benefiting major tech companies such as Microsoft, Amazon, and Google. This focus includes advancements within the Department of Defense, potentially leading to increased government contracts and funding for AI research and development.

Trump has also expressed intentions to make the U.S. the “crypto capital of the planet,” suggesting a regulatory environment conducive to cryptocurrency growth. This approach can benefit tech companies involved in blockchain and digital currencies, potentially leading to increased investments and market expansion in the crypto sector.

Furthermore, big tech companies are likely to benefit from a potential change in leadership at the Federal Trade Commission (FTC) under President Trump due to anticipated shifts in regulatory focus. The current FTC Chair has aggressively pursued antitrust actions against major technology firms, aiming to curb their market dominance. A Trump administration would likely appoint a new head with a more lenient stance toward big tech, easing regulatory constraints and fostering more M&A growth.

During Trump’s first term, the technology sector experienced significant growth both before and during the pandemic. The administration’s tax cuts, and deregulatory measures contributed to a favourable business environment, leading to increased investments and stock market gains in the tech industry. Companies like Apple, Microsoft, and Amazon saw substantial stock price increases during this period.

4. Bitcoin and Cryptocurrency (EBIT, ETC)

On election night, Bitcoin surged to a new record high above $75,000. This movement comes after months of Trump and close associates sharing their optimism for Bitcoin and cryptocurrency.

Firstly, Trump’s pro-crypto stance includes pledges to make the U.S. the “crypto capital of the planet” and to establish a strategic reserve of Bitcoin. His administration’s favourable view of digital assets is expected to create a supportive environment for cryptocurrencies. Additionally, Trump has indicated intentions to replace current regulatory leaders, like SEC Chair Gary Gensler, with more crypto-friendly officials. This shift could lead to clearer and more accommodating regulations, fostering investment and innovation in the crypto space.

At the Bitcoin 2024 conference in Nashville, both Donald Trump and his close campaign associate Robert F. Kennedy Jr. delivered speeches supporting Bitcoin and the broader cryptocurrency sector. Trump outlined initiatives to bolster the U.S. cryptocurrency landscape, including plans to establish the U.S. as a crypto leader and a proposal for a national Bitcoin strategic reserve using existing government holdings.

Robert F. Kennedy Jr., a former independent presidential candidate, who joined forces with Trump in the late stages of his campaign also strongly advocated for Bitcoin. He argued for it to be used as a strategic asset, proposing the Treasury to buy Bitcoin daily until a reserve of 4 million BTC is reached. He suggested making all transactions between Bitcoin and the U.S. dollar non-reportable and non-taxable to simplify and encourage cryptocurrency use. Kennedy also criticized the Federal Reserve’s policies, emphasizing Bitcoin’s potential to promote economic freedom.

Both speeches reflect growing political support for the crypto industry, with each candidate proposing policies aimed at integrating digital assets into the national economy and regulatory framework. Now that the candidates are working together, these plans of crypto deregulation and mass adoption may play out, leading to a massive tailwind for the industry and coin prices.

5. Cybersecurity and National Defense (CYBR)

Donald Trump’s previous administration significantly increased defense spending, allocating over $2.2 trillion to rebuild the U.S. military, including $738 billion in 2020 alone. A substantial portion of this funding was directed toward enhancing cybersecurity capabilities, with the Department of Defense’s cyber budget exceeding $8.5 billion. In 2018, the Trump administration released the National Cyber Strategy, the first comprehensive cyber policy in 15 years, aiming to strengthen national defenses against cyber threats. This strategy emphasized securing federal networks, protecting critical infrastructure, and fostering a resilient digital economy. Given this track record, a renewed Trump administration is likely to continue prioritizing cybersecurity within defense spending, leading to increased investments in cyber defense technologies and benefiting companies specializing in cybersecurity solutions. The defense sector, including cybersecurity, is poised to gain from rising global military expenditures.

Summary

A potential second Trump presidency could impact key U.S. economic sectors, building on his pro-business policies from the first term, including tax cuts, deregulation, and industry-specific investments. Central to his agenda are further corporate tax reductions and regulatory rollbacks, potentially enhancing profitability across industries like large-cap financials, technology, cryptocurrency, and cybersecurity. This blog explores how these sectors might benefit from Trump’s plans to reduce corporate taxes to 15%, ease compliance burdens, and promote sectors like infrastructure, energy, and national defense. His stance on cryptocurrency, aiming to make the U.S. a leader in digital assets, signals substantial support for the crypto market. Moreover, proposed shifts in FTC leadership could foster a more lenient antitrust environment, particularly beneficial for large tech companies. By focusing on growth-friendly policies, Trump’s agenda could create investment opportunities across the U.S. stock market, large banks, tech firms, and cybersecurity, setting the stage for potential market expansion and profitability across these sectors.

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1 Source: Bloomberg, as at November 7, 2024

Source: Getty Images Credit: Douglas Sacha

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