Investors are bracing for a bumpy ride as President-elect Donald Trump begins his second term on Monday, with expectations for major policy changes including deregulation and tax cuts.
These two priorities are keeping Wall Street optimistic, and subdued inflation and strong earnings are also increasing investor optimism. Last week, the S&P 500 (^GSPC) posted its best weekly performance since the election. Since Nov. 5, the S&P 500 has gained 3.6%.
However, some areas of the market could be at risk as President Trump’s unpredictable approach is widely expected to cause market volatility.
In recent weeks, I’ve been speaking with several top CEOs and Wall Street analysts about what Trump 2.0 means for companies and investors. Here’s what they told me about the impact the incoming administration is expected to have on various sectors.
Investors are betting on deregulation and increased M&A activity, with financial stocks seen as the top deals. Just this week, the nation’s largest banks reported a surge in corporate profits.
Goldman Sachs (GS) CEO David Solomon said at the bank’s financial results conference, “There has been a significant change in CEO confidence, especially in response to the results of the U.S. presidential election.” . “I feel like there is a tailwind blowing toward 2025.”
Meanwhile, JPMorgan (JPM) Chief Financial Officer Jeremy Burnham cited a “significant increase in optimism in the overall environment,” and told reporters after the bank’s results that “we are “We’re in an animal spirit moment right now.”
“We need a more leveled, less volatile regulatory environment,” Chris Whalen, chairman of Whalen Global Advisors, told me on Yahoo Finance’s Morning Brief. “It’s ridiculous that[Sen. Elizabeth Warren]would let banks control whether or not they attack them. That’s no way to run a business.”
Read more: President Trump hides behind Davos and the World Economic Forum
Mac Sykes, portfolio manager at Gabelli Funds, expects easing supervision of the banking industry to be a catalyst for the group, telling Yahoo Finance that easing regulation “will benefit banks.”
“We had a 10% hit[from late Basel III]so it’s probably going to be neutral,” Sykes said. He also added that increased M&A within the sector allows smaller companies to take advantage of synergies, but the results are “undervalued by investors.”
Goldman Sachs analyst Joe Ritchie told me last month that the industry is regaining confidence after months of contraction, adding: “Some companies are expecting even better growth in 2025. … It’s only a matter of time before that happens,” he added.
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HEICO (HEI) co-president Eric Mendelsohn said he is among the group’s business leaders who believe President Trump’s policies will boost investor confidence in the economy and create a “very positive environment” for the industrial sector. I’m alone.
Elon Musk’s influence on the next administration could also serve as a new catalyst. Robert Cardillo, chief strategist at Planet Labs (PL), told me last month at the Goldman Sachs Industrial & Materials Conference that Musk’s influence could be “good news” for the sector. He said it was expensive.
Industry leaders and experts hope the next administration will create a supportive backdrop for the industry.
“This is constructive in many ways… I think the tax approach is constructive, and I hope the regulatory environment becomes more constructive for the industry as well,” said Southwest Corp. (LUV) CEO CEO Bob Jordan told me last month.
Industry watchers also believe the Biden administration plans to scale back consumer protection efforts and cut regulations affecting the commercial space and advanced air mobility industries, according to a recent analysis by Pillsbury Law Firm’s aviation team. , predicting major changes in the air transport and aerospace sectors.
Pillsbury’s Charles Donley, Edward Sauer, and Laura Jennings Ochoa wrote, “Trump’s response to joint venture, merger, and acquisition efforts by smaller airlines to more effectively compete with large U.S. airlines.” We hope that the government will support us.”
Top industry analysts agree with this opinion.
“With the attitude of the new government and some of the smaller airlines that are struggling, there is now more potential for M&A…That is on the positive side for the group, and by 2025 That’s certainly more likely than it has been in a year,” Raymond said. Savanti Sis of James told me.
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Big Tech leaders like President-elect Donald Trump’s plan to eliminate regulation and invest heavily in AI.
Amazon (AMZN) founder Jeff Bezos, Apple (AAPL) CEO Tim Cook, Alphabet (GOOGL) CEO Sundar Pichai, META CEO Mark Zuckerberg, Microsoft (MSFT) CEO Satya Nadella is among the technology leaders who funded President Trump’s inauguration. The campaign comes as big tech companies try to gain support from 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.
“With the Khan/FTC era in the rearview mirror, stronger AI initiatives within the Belt and Road are underway, and the Street further digests the cobwebs of deregulation under the Trump administration in the White House, tech stocks are We expect it to rise 25% in 2025, and a Goldilocks Foundation for Big Tech and Tesla looking beyond 2025,” Ives wrote in a note to clients.
IBM CEO Arvind Krishna said at Yahoo Finance’s Invest Conference that the incoming Trump administration will encourage “more innovation and less regulation,” the basis for a more favorable trading environment. He said he hopes to build on this.
“If we have more certainty about the outcome, we will be more willing to engage in things like M&A. …The more certainty we have in the regulatory process and antitrust laws, the more risk we can take. ”Krishna said.
The incoming administration’s plan to reverse the Biden administration’s EV policy on day one poses risks to the auto sector, along with the threat of tariffs.
Tom Donnelly, president and CEO of Mazda’s North American operations, said that given the unpredictability surrounding the Trump administration and the possibility of additional tariffs, doing business under the Trump administration is “a potential risk.” “It will be more difficult,” he told me. He told Yahoo Finance that Mazda has been in the process of “scenario planning” for months, including potentially moving some production from Mexico to a factory in Alabama.
“Uncertainty is not beneficial,” Donnelly told me. “What’s clear is that no company in any industry can absorb the scale of what we’re talking about here.”
Since Election Day, Mr. Trump has threatened a number of tariffs, ranging from phase-in tariffs to 25% tariffs on imports from Canada and Mexico to 60% tariffs on Chinese goods.
Tariffs on Canada and Mexico in particular are expected to have a big impact on the auto sector this year. Evercore’s Chris McNally remains “relatively cautious” on the entire Legacy Auto Group until a resolution to President Trump’s tariff threats is found, with earnings of some of the industry’s biggest companies hurting. I warned him that he would receive it.
“General Motors (GM) has the highest negative EPS exposure from the 25% Mexican tariff, which would hit EPS by 45% to 50% if implemented,” McNally said. I wrote this in a note to customers earlier this month.
GM CEO Mary Barra told Yahoo Finance Editor-in-Chief Brian Sozzi that tariffs could mean higher car prices and perhaps even weaker demand.
RBC’s Tom Narayan sees President Trump’s “erratic” actions as a risk to the industry, and says Trump’s tariff threats will “continue to weigh on” auto stocks until there is some clarity for the industry. I’m predicting it.
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Discount retailers are among the stocks most at risk from tariffs because they rely heavily on imports from China.
For example, a recent analysis by Bank of America’s Christopher Nardone found that nearly a third of the products sold at BOOT are produced in China, and 25% are produced in Mexico. has been done.
Dollar Tree (DLTR) CEO Michael Creedon said on the company’s third-quarter earnings call that the company has implemented policies to reduce tariff-related risks, including: It said it also includes the ability to “completely eliminate a product.”
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President Trump’s promise of mass deportations along with tariffs pose risks to the construction industry.
“Raising tariffs on Canada and Mexico and mass deportations of illegal immigrants could increase the cost of goods and labor. Raising tariffs on China could slow the country’s economy and discourage investment by land developers. “This could lead to a slowdown,” S&P Global Ratings wrote in a recent note.
The researchers note that the softwood used in building frames is often imported from Canada, and the drywall and cement components of gypsum are often imported from both Mexico and Canada.
Joel Varner, senior economist at Realtor.com, echoed that sentiment, warning that rising costs will slow construction activity.
“The incoming Trump administration’s policy initiatives, which promised tariffs on imported goods including construction materials and mass deportations that would impact construction workers’ labor force, are certain to have an impact as construction companies slow down the start of new construction projects. ,” Berner said. I wrote.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email [email protected].
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