Global financial markets are increasingly accepting the possibility of former President Donald Trump securing a second term in the White House, driven by his recent strong debate performance and surviving an assassination attempt.
Investors are now preparing for the economic and market implications of Trump potentially becoming the 47th president. This scenario, often referred to as the “Trump Trade,” is marked by market behaviors and investor responses anticipating Trump’s return to office. Known for his pro-business stance, Trump’s tenure included significant actions such as the 2017 Tax Cuts and Jobs Act (TCJA), which reduced the federal corporate income tax rate from 35% to 21%. This led many firms to pay significantly lower taxes, with some paying no federal income tax at all during the period from 2018 to 2022.
In a meeting with business leaders in June, Trump promised to further reduce the corporate tax rate to 20% and make the 2017 tax cuts permanent, along with renewing cuts for individuals and small businesses. Additionally, a second Trump term would likely bring less regulation and higher tariffs on foreign imports.
Potential beneficiaries of a Trump presidency include healthcare, banking, cryptocurrency, and oil sectors. Trump, now a supporter of Bitcoin, has his campaign accepting donations in various cryptocurrencies and intends to push for all Bitcoin mining in the U.S. The oil industry, which supported Trump in his previous and current campaigns, would also likely benefit, particularly as Trump has indicated willingness to roll back Biden’s environmental policies.
Goldman Sachs has identified 34 U.S.-focused stocks that could outperform in a Trump presidency, including Charter Communications, T-Mobile, Target, Lowe’s, and Wells Fargo. Tesla, despite Trump’s opposition to electric vehicles (EVs), might also gain due to Elon Musk’s recent endorsement of Trump and donations to a pro-Trump PAC.
Conversely, companies in the clean energy sector and those heavily reliant on foreign trade could face challenges. Trump’s criticism of clean energy and Biden’s Inflation Reduction Act, which incentivizes solar and EVs, suggests that a Trump presidency could hurt these industries. Solar and wind energy firms, such as SolarEdge Technologies, SunPower, First Solar, SunRun, Vestas Wind Systems, and Ørsted A/S, have already seen declines partly due to the increased likelihood of a Trump victory.
Trump has vowed to end offshore wind projects immediately and has repeatedly criticized wind energy, making unfounded claims about its environmental and health impacts.