stock market

Which industries will benefit, suffer under a Trump administration? The stock market provides early clues

By Tina Irgang

After an initial slump, stocks quickly rallied as the news of Donald Trump’s victory sank in. Analysts attributed the quick recovery to a realization among investors that the next administration was likely to cut taxes and regulations, and perhaps invest in new infrastructure. So what are the markets telling us about which industries will see the biggest benefit or take the greatest hit?

Following an initial, short-lived panic on the morning after Election Day, “equities soared, with the Dow Jones industrials index gaining 1.4 percent after testing new highs, thanks to big gains in bank stocks and other areas set to benefit from a Trump administration,” reports CNBC. Those areas included healthcare stocks, based on “visions of a lighter regulatory burden on drug makers and biotechs.”

U.S. Steel gained 17.2 percent, CNBC says, due to possible benefits from post-election protectionist policies and greater infrastructure spending. Defense stocks, such as Lockheed Martin, also did well, “thanks to Trump’s clamoring for an upgrade to military hardware.”

On the other hand, real-estate investment trusts and clean-energy stocks performed poorly.

Gunmakers’ stocks also fell “because there would be no post-election surge of sales caused by fears of new gun-control legislation,” reports The Los Angeles Times.

Effects of a Trump administration: Breakdown by industry

  • Energy: “Alternative-energy companies, notably solar, took a drubbing on Wednesday Nov. 9, and are expected to be among the big losers from a Trump presidency. Trump has promised an energy revolution that is anti-regulation and heavily focused on traditional fossil-fuel energy sources,” notes MarketWatch. So while solar and other alternative-energy sources are likely to see tax credits and other benefits rolled back, the election was happy news for the struggling coal industry.
  • Retail and hospitality: Given the president-elect’s plans for extensive tax cuts, consumers may have more money in their pockets to spend on discretionary items, such as meals out or a bigger TV, notes CNN Money. However, there could also be drawbacks: “Trump has been vocal about his plans to clamp down on immigration and ban certain ethnic and religious groups — measures that would disproportionately hurt hotels, which rely heavily on ‘low-skill’ foreign workers,” according to The Washington Post.
  • Healthcare: Given Trump’s pledge to replace Obamacare, this sector is facing a period of great uncertainty until more details of an alternative emerge. “Drug stocks, in contrast, are expected to benefit, as the president-elect’s position on regulating prices appears less harsh than his opponent’s,” says MarketWatch.
  • Banks and other financial institutions: The Dodd-Frank regulations introduced after the 2008 crash have been cutting into banks’ profits. A key part of Trump’s vision is to scale back those regulations, so the outlook for banks is positive, says CNN Money.
  • Engineering and construction: During the campaign, president-elect Trump repeatedly pledge to improve U.S. infrastructure. If he fulfills this promise, it would translate into major building projects, providing a boost to engineering and construction, reports The Washington Post.
  • Manufacturing: The outlook for manufacturers is decidedly mixed. Large-scale infrastructure spending could benefit automakers, but they might see their existing investments in electric vehicles fizzle out if a Trump administration withdraws incentives, notes The Washington Post. Small manufacturers might see a net positive due to lower taxes and deregulation, but larger companies that rely on international business have been concerned about the impact of Trump’s pledges to withdraw from NAFTA, notes The Wall Street Journal.
  • Technology: Health IT companies, which got a boost by technology-centric Obamacare reforms, would likely take a hit if the law is dismantled, notes The Washington Post. As for the more general tech outlook, tech stocks have slumped “as investors considered the implications of a Trump presidency for a sector whose executive leadership was roundly critical of the candidate and his campaign,” says MarketWatch. “On the other hand, Trump’s promise to slash the corporate tax rate may allow some tech players with massive cash holdings overseas to bring that cash home without it being subjected to the current 35 percent rate.”

Tina Irgang is the managing editor of SmartCEO magazine and SmartCEO.com. Contact her at tina@smartceo.com