Sectors poised for growth under Trump’s administration

Roger Montgomery | Montgomery Investments

One of the most frequently asked questions by investors following Trump’s election victory is: what sectors will do well? While much remains unknowable about Trump’s second term, his “promises made, promises kept” statement during his victory speech suggests not all is a mystery.

While this Trump presidency may be different to the first, we can make some assumptions about which sectors could outperform. To do this, one must examine the sectors that benefited from the Republican Party’s previous policies and Trump’s stated agendas.

What follows is an executive summary of sectors that could potentially do well under a Trump administration:

Energy:

Oil and gas: Trump’s administration previously rolled back regulations on fossil fuels and withdrew from the Paris Agreement. A renewed focus on domestic energy production could benefit U.S. oil and gas companies.

Coal:

Efforts to revive the coal industry might provide a temporary boost to coal mining companies.

Defence and aerospace:

Increased defence spending was a hallmark of Trump’s previous term. Due to higher government contracts, companies manufacturing defence equipment and technology could see growth.

Financial services:

Banks, financial Institutions, and credit card companies could outperform. Deregulation efforts might resume, potentially benefiting large banks and financial firms by reducing compliance costs and restrictions on certain activities.

Construction and infrastructure:

Trump’s emphasis on rebuilding America’s infrastructure could lead to increased government spending, benefiting construction companies and materials suppliers.

Domestic manufacturing and industrial:

Policies to bring manufacturing jobs back to the U.S., including tariffs on imported goods, could boost domestic manufacturing companies.

Pharmaceuticals and biotechnology:

While healthcare policies can be complex, certain deregulations might favour large pharmaceutical companies, potentially accelerating drug approvals and reducing operational hurdles.

Telecommunications:

Support for expanding 5G infrastructure and less stringent regulations might benefit telecom companies.

Cybersecurity:

Increased focus on national security could lead to more government contracts for cybersecurity firms.

Commercial real estate:

Tax reforms and economic policies favouring businesses might stimulate commercial real estate market growth.

Travel:

Cruise companies benefit from the U.S. doing well, as American passengers represent their biggest market. A stronger U.S. dollar will make international travel cheaper for U.S. citizens.

Other considerations

Trade policies:

Trump’s approach to international trade, including tariffs and renegotiating trade agreements, could have mixed effects. While some domestic industries might benefit, others reliant on global supply chains could face challenges.

Regulatory environment:

A general trend toward deregulation might reduce business costs across various sectors. But lower regulation also introduces the possibility of new risks for businesses (for example from unregulated practices and competition, and monopoly behaviour) that investors should carefully assess.

Market volatility:

Political uncertainty, particularly shifts in foreign policy could lead to increased market volatility, affecting investment returns unpredictably. 

Learn how the industry leaders are navigating today's market every morning at 6am. Access Livewire Markets Today.

All prices and analysis at 12 November 2024.  This document was originally published in Livewire on 12 November 2024. This information has been prepared by Montgomery Investment Management Pty Ltd ABN 73 139 161 701 AFSL 354 564. The content is distributed by WealthHub Securities Limited (WSL) (ABN 83 089 718 249)(AFSL No. 230704). WSL is a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited (ABN 12 004 044 937)(AFSL No. 230686) (NAB). NAB doesn’t guarantee its subsidiaries’ obligations or performance, or the products or services its subsidiaries offer.  This material is intended to provide general advice only. It has been prepared without having regard to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice.  Past performance is not a reliable indicator of future performance.  Any comments, suggestions or views presented do not reflect the views of WSL and/or NAB.  Subject to any terms implied by law and which cannot be excluded, neither WSL nor NAB shall be liable for any errors, omissions, defects or misrepresentations in the information or general advice including any third party sourced data (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the general advice or information. If any law prohibits the exclusion of such liability, WSL and NAB limit its liability to the re-supply of the information, provided that such limitation is permitted by law and is fair and reasonable. For more information, please click here.