Stocks & Industries to Watch Under Trump's Second Presidency

Key takeaways

• Tech stocks underwent substantial growth due to tax cuts and reduced corporate regulations in Trump's first term along with defense and aerospace companies benefitting from increased government defense spending and military expansion and modernization.

• For Trump's second term, deregulation could continue with sectors like energy, financial services, pharmaceuticals, and cryptocurrency experiencing growth.

Introduction

In the 2024 U.S. presidential race, President Donald Trump and Vice President Kamala Harris presented a wide array of economic policies that could significantly impact the economy, industries, and stock markets.

For Trump, his policies were largely focused on tax cuts, deregulation, and America-first trade practices. He aimed to cut corporate taxes further, reduce individual income taxes, and repeal the SALT (State and Local Tax) cap. His strategy also included a hard stance on trade, proposing higher tariffs, especially on China. These policies could stimulate short-term growth but raise concerns about long-term deficits and national debt.

As for Harris, she backed proposals focusing on expanding support for working-class and middle-income families, investing in small businesses, and addressing inflation concerns. She wanted to increase taxes on the wealthy, particularly in terms of capital gains. Harris also supported stronger regulation of big corporations, which may stifle short-term market growth but aim to reduce income inequality.

Trump's economic policies during the 2024 presidential campaign

Trump on crypto

Trump promoted a notably pro-cryptocurrency stance, pledging to end restrictive measures he attributed to Democrats, like "Operation Chokepoint 2.0," which many in the industry view as a crackdown on crypto firms.  He also expressed interest in making the U.S. a global crypto hub, proposing policies that included regulatory clarity, increased financial innovation, and potentially replacing Gary Gensler as Securities and Exchange Commission (SEC) chair.

Trump on manufacturing

Trump shared an ambitious plan to revitalize U.S. manufacturing, aiming to bring production back to America and reduce reliance on overseas industries. His proposals centered on creating special economic zones with drastically reduced taxes and regulations to attract companies to set up factories in the U.S. Trump advocated for a "Made in America" tax rate, reducing corporate taxes to 15% for businesses manufacturing domestically and aimed to make the U.S. a more attractive option by offering lower energy costs and regulatory burdens.

Trump also promised a "Manufacturing Ambassador," a role dedicated to persuading global companies to relocate to the U.S. In an effort to support American jobs and address trade imbalances, he proposed high tariffs, including a 100% tariff on cars made in Mexico and potentially across-the-board tariffs on goods imported from other countries.

Trump emphasized that these tariffs and other measures were meant to counteract what he described as unfair foreign trade practices, particularly with China. His focus on auto manufacturing included direct appeals to American workers, positioning his policies as a response to the decline of traditional manufacturing industries.

Trump on the energy sector

Trump’s energy policies emphasized a return to fossil fuels, scaling back renewable energy initiatives, and reducing federal regulations. His main policy positions in the energy sector include increased oil and natural gas production through deregulation. He promised to speed up federal drilling permits and leases, especially on federal lands, as well as to streamline the approval of natural gas pipelines.

Trump expressed skepticism about renewable energy sources, especially wind and solar power. He argued that these technologies are unreliable and costly, specifically targeting offshore wind projects and claiming they harm marine ecosystems. Trump also opposed subsidies for electric vehicles, arguing that they threatened American jobs and benefited foreign manufacturers, notably in China.

Trump aimed to roll back federal energy efficiency standards on appliances and other products, which he argued limit consumer choice and increase costs. He pledged to repeal such standards, which he viewed as overly restrictive and misaligned with U.S. energy priorities.

While largely opposed to renewable initiatives, Trump was supportive of nuclear energy. He advocated for maintaining existing reactors and advancing small modular reactors, aligning in part with Biden’s stance on the importance of nuclear power as part of the energy mix.

Trump’s policies indicated a potential increase in tariffs on imported solar energy equipment to protect U.S. manufacturers, a stance he had maintained during his first administration. Although he opposed many clean energy subsidies introduced in the Inflation Reduction Act, some analysts noted that certain solar incentives might still survive due to support from rural constituencies that benefit economically from solar projects.

Trump on the consumer discretionary sector

Trump’s policies focused on key issues such as inflation, tax reductions, and support for certain American businesses. They included advocating for supply-side tax cuts aimed at increasing disposable income, which could, in theory, encourage spending on discretionary goods. Trump also focused to counter inflation by tackling energy costs, reducing regulations, and emphasizing domestic manufacturing, aruging this would help lower prices on consumer goods by reducing reliance on imports and keeping production costs down.

Additionally, Trump’s plans included tax policies geared towards stimulating consumer spending by lowering income and business taxes, thus increasing consumers' purchasing power. However, his focus on increasing tariffs for foreign competitors in specific industries aimed to give U.S.-made consumer products a market advantage, aligning with his broader "America First" economic stance.

On technology issues, Trump advocated for social media reforms that could impact advertising and marketing dynamics, key to consumer discretionary brands. His views also showed opposition to renewable energy mandates, which could lead to lower costs for traditional fuel sources, impacting transportation and logistics expenses for consumer goods.

These policies reflect his broader economic goals of boosting American manufacturing and reducing regulatory burdens, intending to drive growth in the Consumer Discretionary sector through increased consumer spending and domestic production support.

Trump on the healthcare sector

Trump's healthcare policies reflect a blend of deregulation, state autonomy, and cost-cutting, focusing on reducing federal spending while implementing stricter immigration controls and price transparency initiatives.

One of Trump's primary healthcare goals was to reduce federal involvement in healthcare by weakening the ACA. He indicated he might pursue actions similar to his previous attempts to repeal the ACA, which could include reducing federal subsidies and giving states more flexibility in managing Medicaid funds. This plan aligns with his broader aim to shift healthcare decision-making to states, potentially impacting coverage for lower-income individuals and those with pre-existing conditions.

On drug pricing, Trump emphasized lowering costs, including through potential international reference pricing, which would limit the prices Medicare pays for drugs based on rates in other countries. Trump also expressed support for transparency in healthcare pricing, aiming to extend the requirements for hospitals and insurers to disclose their rates, which he initiated during his previous term.

Additionally, Trump’s campaign included restrictive policies toward immigrant healthcare access, echoing previous actions. He has proposed tightening Medicaid eligibility for immigrants, particularly those deemed likely to rely on government support.

Growth sectors & stocks during Trump's first term

During Trump’s first term, several sectors underwent growth due to a combination of tax cuts, deregulation, and favorable government contracts. Here’s some sectors that performed well:

Technology: Tech stocks like Amazon (AMZN), Microsoft (MSFT), and Apple (AAPL) saw substantial growth due to tax cuts and reduced corporate regulations. Many companies in this sector capitalized on the global digital transformation accelerated by advances in cloud computing, e-commerce, and data services.

Defense and aerospace: Companies like Lockheed Martin (LMT), Boeing (BA), and Northrop Grumman (NOC) benefited from increased government defense spending. The defense sector saw a boost as Trump's administration prioritized military expansion and modernization, translating into higher stock values for defense contractors

Financials: Banks and financial institutions gained from the rollback of specific Dodd-Frank regulations, which provided more operational flexibility. This included raising thresholds on stress tests, which allowed for increased lending and profit potential.

Energy: Traditional energy companies, particularly those in oil and gas, experienced mixed results. While the administration’s pro-energy policies included opening up more drilling sites and rolling back regulations, overproduction often led to price instability in the oil market, which impacted overall performance for energy stocks during Trump’s term.

Healthcare: Health stocks, especially in biotech, were influenced by attempts to modify ACA. Although major changes to it were not fully realized, healthcare companies in sectors like pharmaceuticals and biotechnology saw continued gains, driven by ongoing research and development investments and consumer demand for medical innovations.

Trump's economic policies and accomplishments during his first term

Trump's first presidential term: Crypto

Trump's stance on cryptocurrency was generally critical and cautious, with a focus on regulatory oversight rather than support for the industry's growth. Here are key aspects of Trump's crypto policies.

In 2019, Trump made his stance clear when he tweeted that he was "not a fan" of Bitcoin and other cryptocurrencies, which he criticized for being "highly volatile" and "based on thin air." He also warned that digital currencies could facilitate illegal activities such as drug trafficking.

In Trump’s administration, especially under the Treasury Department and the SEC, it took steps to increase oversight of the crypto sector. Regulatory agencies frequently scrutinized Initial Coin Offerings (ICOs) and cryptocurrencies, viewing many as potential unregistered securities. The SEC pursued enforcement actions against several crypto projects, aiming to protect investors from potential fraud and misleading offerings.

The Treasury Department worked to strengthen Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements for cryptocurrency transactions. Steve Mnuchin, formerly Secretary of the Treasury under Trump, described cryptocurrencies as a "national security issue" due to concerns about their potential use in money laundering and other illegal activities. The Financial Crimes Enforcement Network (FinCEN) proposed regulations requiring cryptocurrency exchanges to report certain transactions, which sparked debate within the industry.

Trump’s administration also expressed concern that the rise of cryptocurrencies, especially stablecoins and Libra (Facebook's proposed digital currency), could undermine the U.S. dollar's dominance. Officials highlighted the risks of a private company or digital currency displacing traditional financial systems.

Trump's first presidential term: Information technology

Trump took a hands-off approach to the Information Technology (IT) sector, largely focused on deregulation and promoting business growth with minimal government intervention. His administration’s technology policies included repealing net neutrality, scaling back privacy protections, and advocating for 5G expansion.

The Federal Communications Commission (FCC) under Trump reversed the Obama-era net neutrality rules, allowing internet service providers more freedom in managing and prioritizing traffic. This decision was supported by ISPs but criticized by advocates for a free and open internet, who argued it could hinder fair access to online content.

Trump’s administration also maintained a competitive stance toward China, particularly regarding advanced technologies and cybersecurity. His policies restricted Chinese access to certain U.S. tech exports, especially in areas like semiconductor manufacturing and artificial intelligence (AI). This was part of a broader push to limit China’s influence on American technology sectors and prevent intellectual property theft, which had a lasting impact on U.S.-China tech relations.

Additionally, the administration did not place significant emphasis on AI development governance, contrasting with the subsequent Biden administration's more regulatory stance on AI and other emerging tech.

Further, Trump’s focus on workforce development included measures aimed at promoting STEM education and vocational training, intended to prepare the U.S. workforce for future IT sector jobs. However, his administration's science and technology leadership, particularly through the Office of Science and Technology Policy (OSTP), remained limited in staffing and influence compared to prior administrations.

Trump's first presidential term: Consumer discretionary

Trump's policies focused on boosting domestic manufacturing and encouraging consumer spending. His administration's tax cuts and deregulatory agenda were aimed at increasing disposable income and fostering business growth, including consumer-focused businesses. Trump's corporate tax reductions were expected to stimulate spending and investment in sectors like retail, entertainment, and automotive by freeing up capital.

Tariffs on imports, particularly from China, aimed to protect U.S. consumer goods and manufacturing industries. However, these tariffs had mixed impacts on consumer discretionary companies, as higher costs for imported materials and goods sometimes translated to higher consumer prices.

Additionally, Trump’s administration relaxed regulations on automobile fuel efficiency standards, which benefited car manufacturers but raised environmental concerns. In the broader consumer sector, Trump aimed to reduce regulatory barriers for small businesses, hoping to spur growth in retail and other consumer-centric businesses by making it easier and less costly to operate in the U.S. market.

Trump's first presidential term: Healthcare

Healthcare policy was a central focus, with a major priority repealing and replacing the ACA, which was a core campaign promise. Trump's administration actively supported efforts in Congress to dismantle the ACA, including proposals to eliminate the Medicaid expansion and weaken protections for those with pre-existing conditions. Although these efforts were not fully successful, the administration continued to push for legal action to overturn the ACA in its entirety, culminating in a Supreme Court case during 2020.

Trump's healthcare policies also emphasized reducing drug prices, including measures to improve price transparency and lower insulin costs for some Medicare beneficiaries. While these initiatives were not entirely implemented, they signaled a clear intention to curb healthcare expenses for Americans. Additionally, the administration focused on issues like mental health, opioid addiction, and substance abuse, declaring the opioid crisis a national emergency and securing billions in funding to combat the epidemic.

On the Medicare front, Trump worked to introduce reforms aimed at protecting seniors, including efforts to modernize Medicare services and reduce fraud. He also signed executive orders addressing innovations in treatments for various diseases, such as Alzheimer's, HIV, and kidney disease.

Trump's first presidential term: Materials

Trump's policies in the materials sector, particularly those related to tariffs and trade protectionism, had a significant impact on U.S. industries and global trade dynamics. These measures had been designed to bolster U.S. production but also resulted in higher costs from industries relying on imported raw materials.

One of Trump's most notable actions was the imposition of tariffs on imported steel and aluminum in 2018, using national security as a justification under Section 232 of the Trade Expansion Act of 1962. These tariffs were intended to protect American manufacturers from foreign competition, particularly from China, and to revive domestic production. The tariffs sparked retaliation from trading partners, including the European Union and China.

Trump framed these actions as necessary to preserve U.S. national security and economic sovereignty.

Trump also implemented tariffs on a wide range of Chinese goods, part of a broader trade war with China. The goal was to reduce the U.S. trade deficit and compel China to address intellectual property theft, forced technology transfers, and other unfair trade practices. While some U.S. industries benefitted from these tariffs, especially in sectors like steel, many manufacturers that relied on imported raw materials saw increased costs.

In addition, Trump's administration renegotiated the North American Free Trade Agreement (NAFTA), leading to the U.S.-Mexico-Canada Agreement (USMCA). The new agreement included provisions aimed at increasing the use of U.S. materials in manufacturing and encouraging the return of jobs to the U.S., although the changes primarily benefitted the automotive sector.

Trump's second term: Institutional & analyst outlook on the economy

According to Morgan Stanley and MetLife, here are some potential takeaways under a second Trump term:  

• Extending Trump's Tax Cuts and Jobs Act could increase federal deficits while potentially boosting corporate valuation multiples, benefiting corporate earnings and stock valuations in the short term. However, the long-term fiscal impact could lead to growing budget deficits.

• Proposed tariffs on Chinese imports could exacerbate inflationary pressures, particularly in consumer goods and tech products, which may hurt U.S. economic growth by raising input costs and reducing purchasing power.

• Deregulation under Trump’s policies is expected to support growth in sectors like energy, financial services, pharmaceuticals, and cryptocurrency by reducing operational burdens. However, these policies could pose risks to clean energy and electric vehicle industries, which are more dependent on government incentives and regulatory support.

• The introduction of sweeping policy changes, especially in trade and regulation, could fuel market volatility as investors react to shifting priorities and uncertainty across industries.

• International trade policy will remain a key area of focus, with sectors reliant on global trade—such as technology and manufacturing—being especially susceptible to shifts in trade tariffs, regulations, and diplomatic relations.

• While higher government debt could limit Trump’s ability to pursue expansive new initiatives, greater alignment on industrial policy and a tough stance on China could provide economic tailwinds for domestic manufacturing and defense sectors.

In a look at the potential effect on consumers, in June 16 Nobel Prize-winning economists signed a letter expressing concern about inflation increasing under Trump's proposals and in September, the Peterson Institute for International Economics predicted that under Trump's policies in his second term, such as deportations and import taxes, could drive consumer prices higher. Analysts predicted inflation to jump between 6% to 9.3%.

Wrap-Up

During Donald Trump's first term, the U.S. economy experienced both growth and significant challenges. Key indicators such as GDP growth, job creation, and stock market performance showed positive trends before the onset of the COVID-19 pandemic. As to what's next for a second term, a review of the first term may offer some clues.

The stock market had a strong performance, especially during the first three years of Trump’s term. The Dow Jones Industrial Average surged nearly 50%, but this was partly due to pre-pandemic conditions and a "sugar high" from the tax cuts.

Crypto experienced a rollercoaster of growth and decline, with a market boom in 2017, a correction in 2018, and momentum in 2020 as institutional interest surged. Trump's lack of direct regulation allowed the market to grow, but regulatory uncertainty, particularly around ICOs and the classification of tokens, remained a challenge.

The IT sector experienced significant growth, primarily driven by the performance of major technology companies. It was one of the best performers during his presidency, largely benefiting from Trump's pro-business policies and focus on innovation.

Consumer Discretionary performed strongly, driven by a combination of tax cuts, consumer spending, and a generally favorable economic environment. This sector, which includes industries like retail, automotive, entertainment, and leisure, benefited from the pro-business and deregulation-focused policies of the Trump administration.

The healthcare sector experienced mixed results: deregulation and tax cuts helped certain parts of the industry, while efforts to repeal the ACA created uncertainty. The COVID-19 pandemic highlighted both challenges and opportunities within the sector, particularly for pharmaceuticals and healthcare technology companies.

The materials sector benefited from tax cuts and deregulation but faced challenges from trade tensions and global commodity price fluctuations. The COVID-19 pandemic caused short-term disruptions but also led to recovery as demand for certain materials rebounded.

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