Investors brace for a bumpy ride as President-elect Donald Trump’s second term gets underway on Monday, bringing the promise of serious policy shifts — including lighter regulation and tax cuts.
Those two priorities have Wall Street upbeat, while cooling inflation and robust earnings have also fueled investor optimism. This past week, the S&P 500 (^GSPC) clocked its best weekly performance for the reason that election. Since Nov. 5, the S&P 500 has climbed 3.6%.
Yet some areas of the market could possibly be in danger, as Trump’s unpredictable approach is basically 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 concerning 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 was a meaningful shift in CEO confidence, particularly following the outcomes of the US election,” Goldman Sachs (GS) CEO David Solomon said on the bank’s earnings call. “It appears like now we have a tailwind going into 2025.”
Meanwhile, JPMorgan (JPM) CFO Jeremy Barnum cited a “significant amount of increase of optimism in the general environment,” telling reporters following the bank’s earnings results that “we’re in an animal-spirits moment straight away.”
“We want to have a more level, less volatile regulatory environment,” Chris Whalen, chairman of Whalen Global Advisors, told me on Yahoo Finance’s Morning Transient. “Having banks manage their business on whether or not [Senator] Elizabeth Warren goes to attack them or not is absurd. You may’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 “profit the banks.”
“There was a ten% hit that was coming [from Basel III endgame], and that probably will go to neutral,” Sykes said. He also added that increased M&A inside the sector will allow smaller players to reap the benefits of synergies, an end result that’s being “underappreciated by investors.”
Goldman Sachs analyst Joe Ritchie told me last month that the commercial sector is gaining confidence after months of contraction, adding “several corporations predict higher growth in 2025 … It’s only a matter of time before it happens.”
HEICO (HEI) co-president Eric Mendelson is among the many group’s business leaders who see Trump’s policies boosting investor confidence within the economy, making a “very positive environment” for the commercial sector.
And Elon Musk’s influence on the incoming administration could possibly be one other catalyst. Robert Cardillo, chief strategist of Planet Labs (PL), told me last month on the Goldman Sachs Industrial and Materials conference that Musk’s impact will likely be “excellent news” for the sector.
Industry leaders and experts predict the incoming administration to create a supportive backdrop for the sector.
“It’s constructive in lots of ways … The tax efforts I believe are constructive. The regulatory environment I hope can be 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 cut back the Biden administration’s consumer protection initiatives and reduce regulations affecting the business space and advanced air mobility industries, in line with recent evaluation 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 brand new administration’s stance in addition to a number of the smaller airlines struggling, there is a higher probability of M&A now … that is an upside for the group and definitely the next likelihood in 2025 than what we have seen these past few years,” Raymond James’s Savanthi Syth told me.
Big Tech leaders are cozying as much as President-elect Donald Trump resulting from 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 amongst tech leaders who contributed funds to Trump’s inauguration campaign as Big Tech tries to win the backing of the brand new administration.
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Wedbush’s Dan Ives expects the technology sector to be an enormous winner this yr, predicting a “Goldilocks” scenario for Big Tech.
“We expect tech stocks to be up 25% in 2025 because the Street further digests a less regulatory spider web under Trump within the White House with Khan/FTC days within the rear-view mirror, stronger AI initiatives inside the Beltway on the best 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 “lots more innovation and fewer regulation,” laying the groundwork for a more favorable deal environment.
“If now we have more certainty on the end result, then we’re willing to lean into things like M&A. … If the regulatory process and antitrust are going to be more certain, that permits you to take more risk,” Krishna said.
Plans by the incoming administration to roll back the Biden administration’s EV policies on day one, together 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” harder 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 incorporates potentially shifting a few of its production from Mexico to its plant in Alabama.
“Uncertainty isn’t helpful,” Donnelly told me. “What’s clear is not any business in any industry can absorb the magnitude of what is being talked about here.”
Since Election Day, Trump has threatened a slew of tariffs, starting 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, specifically, are expected to be an overhang for the auto sector this yr. Evercore’s Chris McNally stays “relatively cautious” on your entire legacy auto group until there’s a resolution on Trump’s tariff threats, warning of an earnings hit to a number of the industry’s largest players.
“General Motors (GM) has the very best negative EPS exposure to a 25% Mexico Tariff within 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 “proceed to pressure” auto stocks until the industry gains some clarity.
Discount retailers are among the many stocks most vulnerable to tariffs, because the group relies heavily on Chinese imports.
For instance, nearly a 3rd of products sold at Boot Barn (BOOT) are produced in China, while 25% are produced in Mexico, in line with recent evaluation from Bank of America’s Christopher Nardone.
Dollar Tree (DLTR) CEO Michael Creedon noted on the corporate’s third quarter earnings call that the retailer has policies in place to mitigate risk related to tariffs, including the power to “eliminate the product altogether.”
Construction
Trump’s promise of mass deportations, together with tariffs, is a risk to the development 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 Rankings wrote in a recent note.
The team notes that softwood lumber, which is used to border buildings, is usually imported from Canada, while drywall and cement component gypsum is usually imported from each Mexico and Canada.
And that sentiment was echoed by Realtor.com’s senior economist Joel Berner, who warned that higher costs will slow constructing activity.
“Policy initiatives of the incoming Trump administration, which has promised tariffs on imported goods that include construction materials and mass deportations that may impact builders’ labor forces, surely have come into play as builders decelerate when it comes to initiating recent constructing projects,” Berner wrote.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips about deals, mergers, activist situations, or anything? Email seanasmith@yahooinc.com.