Investors are bracing for a bumpy ride as President-elect Donald Trump’s second term begins on Monday, promising significant policy changes including lighter regulation and tax cuts.
Both of these priorities are upbeat on Wall Street, while cooling inflation and strong earnings also fueled investor optimism. Last week, the S&P 500 (^GSPC) posted its best weekly performance since the election, with the S&P 500 up 3.6% since Nov. 5.
However, some sectors of the market may be at risk as Trump’s unpredictable approach will mostly cause 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, and here’s what they told me about the expected impact of the incoming administration in various areas.
Financials are seen as the top trade as investors bet on looser regulation and increased M&A activity.Just this week, the nation’s biggest banks reported a rise in corporate profits.
“There has been a significant shift in CEO confidence, especially since the US election results,” Goldman Sachs (GS:) CEO David Solomon said during the bank’s earnings call. “We get the impression that in 2025
While JPMorgan (J.P.MCFO Jeremy Barnum noted a “significant increase in optimism in the overall environment”, telling reporters following the bank’s earnings results that “we are now in an animal spirits moment”.
“We need to have a more level, less volatile regulatory environment,” Chris Whalen, president of Whalen Global Advisors, told me on Yahoo Finance’s Morning Brief [Senator] Elizabeth Warren is going to attack them or not is absurd. You can’t do business like that.”
Mack Sykes, portfolio manager at Gabelli Funds, expects lighter banking regulation to be a catalyst for the group, telling Yahoo Finance that deregulation “will benefit banks.”
“There was a 10% hit that was coming [from Basel III endgame]and it will probably go to neutral.” Sykes said. He also added that increased M&A in the sector would allow smaller players to take advantage of synergies, an outcome that is “undervalued by investors”.
Goldman Sachs analyst Joe Ritchie told me last month that the industrial sector was regaining confidence after months of contraction, adding that “several companies expect better growth in 2025 … It’s only a matter of time before that happens.”
HEICO (HERE) co-chairman Eric Mendelsohn 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 over the incoming administration could be another catalyst, said Robert Cardillo, chief strategist at Planet Labs (PL:), told me last month at Goldman Sachs Industrial and Materials Conference that Musk’s influence would likely be “good news” for the industry.
Industry leaders and experts expect the incoming administration to create a supportive backdrop for the industry.
“It’s constructive in many ways… The tax effort, I think, is constructive. The regulatory environment is hopefully more constructive for the industry as well,” Southwest (LUV:) CEO Bob Jordan told me last month.
And industry observers predict significant changes in the air transportation and aerospace industry, including plans by the Biden administration to scale back consumer protection initiatives and reduce regulations affecting commercial space and the advanced air mobility industry. recent analysis from the aviation team at Pillsbury Law Firm.
“We expect the Trump administration to support small airlines’ joint venture, merger and/or acquisition efforts to compete more effectively with larger U.S. airlines,” wrote Pillsbury’s Charles Donley, Edward Sauer and Laura Jennings Ochoa.
That sentiment is echoed by leading industry analysts.
“With the new administration’s stance, as well as some of the smaller airlines struggling, there is now a better opportunity for M&A … that’s a positive for the group and certainly more likely in 2025 than what we’ve seen in these few years,” Raymond’s Savanthi Syth told me.
Big tech leaders are applauding President-elect Donald Trump as he plans to ditch regulations and invest heavily in artificial intelligence.
Amazon (AMZN:) founder Jeff Bezos, Apple (AAPL:) CEO Tim Cook, Alphabet (GOOGLE:) CEO Sundar Pichai, Meta (AFTER:) CEO Mark Zuckerberg and Microsoft (MSFT:) CEO Satya Nadella is among the tech leaders who have contributed funds to Trump’s inauguration campaign as Big Tech tries to win the support of the new administration.
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Wedbush’s Dan Ives expects the tech sector to be a big winner this year, predicting a “Goldilocks” scenario for Big Tech.
“We expect tech stocks to rise 25% in 2025 as the Street further digests the less regulatory cobwebs under the Trump White House, the Khan/FTC days in the rearview mirror, stronger AI initiatives on the way in the Beltway a foundation for Big Tech and Tesla looking to 2025 and beyond,” Ives wrote in a note to clients.
IBM (IBM) CEO Arvind Krishna told me at Yahoo Finance Investments At the conference, he hoped the incoming Trump administration would promote “a lot more innovation and less regulation,” laying the groundwork for a more business-friendly environment.
“If we have more confidence in the outcome, then we’re willing to lean into things like M&A. … If the regulatory process and the antitrust system is going to be more certain, it allows for more risk taking,” Krishna said.
The incoming administration’s plans to roll back the Biden administration’s Power Generation policy on Day One, along with threats of tariffs, pose a threat to the auto sector.
Tom Donnelly, president and CEO of Mazda North American Operations, told me it is “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 conducting “scenario planning” for months, which includes the possibility of moving some of its production from Mexico to a plant in Alabama.
“Uncertainty is not good,” Donnelly said.
Since Election Day, Trump has threatened a series of tariffs, ranging from phase-in to 25% tariffs on imports from Canada and Mexico and 60% tariffs on Chinese goods.
Tariffs from Canada and Mexico, in particular, are expected to be a big deal for the auto sector. Evercore’s Chris McNally remains “relatively cautious” on the entire legacy auto group pending a decision on Trump’s tariff threats, warning some of the industry’s biggest players. about loss of income.
“General Motors” (GM:) has the highest negative EPS impact to Mexico’s 25% tariff, in a whopping 45%-50% EPS range if implemented,” McNally wrote in a note to clients earlier this month.
RBCs Tom Narayan He sees Trump’s “erratic” behavior as a threat to the industry and expects Trump’s threat of tariffs to “continue to pressure” auto stocks until the industry gains some clarity.
The discount retailer is among the stocks most at risk from the tariffs, as the group relies heavily on Chinese imports.
For example, almost a third of the products sold at Boot Barn (BOOT:) are produced in China, while 25% are produced in Mexico, according to a recent analysis by Bank of America’s Christopher Nardone.
dollar tree (DLTR:) CEO Michael Creedon noted during the company’s third-quarter earnings call that the retailer has policies in place to mitigate risks associated with tariffs, including the possibility of “completely eliminating the product.”
Construction
Trump’s promise of mass deportations, along with tariffs, is a risk for the construction industry.
“Higher tariffs on Canada and Mexico and mass deportations of illegal immigrants could increase material and labor costs. Higher tariffs on China could slow its economy, forcing land developers to slow investment,” S&P Global Ratings wrote in its latest report. in the post.
Softwood lumber used for framing buildings is often imported from Canada, while gypsum, a component of drywall and cement, is often imported from both Mexico and Canada, the team notes.
And that sentiment was echoed by Realtor.com senior economist Joel Berner, who warned that higher costs would slow construction activity.
“The incoming Trump administration’s policy initiatives, which have promised tariffs on imports including building materials and mass displacements that will affect the construction workforce, are sure to come into play as builders slow to start new construction projects,” Berner said. wrote:
Sean Smith Anchor at Yahoo Finance Follow Smith on Twitter @SeanaNSmith:. Tips on deals, mergers, activist situations or anything else email seanasmith@yahooinc.com.
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