Investors are bracing for a bumpy ride as President-elect Donald Trump begins his second term on Monday, promising major policy shifts including deregulation and tax cuts.
Those two priorities have Wall Street feeling optimistic, while cooling inflation and strong earnings are also fueling investor optimism. Last week, the S&P 500 Index (^GSPC) had its best weekly performance since the election. Since November 5, the S&P 500 has gained 3.6%.
However, certain areas of the market may be at risk, as Trump's unpredictable approach is largely expected to trigger market volatility.
In recent weeks, I've talked with several top CEOs and Wall Street analysts about what Trump 2.0 means for businesses and investors. Here's what they told me about the expected impact of the incoming administration on various sectors.
The financial sector is seen as a hot trade as investors bet on looser regulations and increased merger and acquisition activity. Just this week, the largest U.S. banks reported a surge in corporate profits.
“There’s been a meaningful shift in CEO confidence, especially following the U.S. election results,” Goldman Sachs (GS) CEO David Solomon said on the bank’s earnings call. “Feelings coming in 2025 will be a good year for us.”
Meanwhile, JPMorgan Chief Financial Officer Jeremy Barnum said there was a "significant increase in optimism in the overall environment," telling reporters after the bank's earnings, "We are now It’s a dynamic moment.”
“We need a more level, less volatile regulatory environment,” Chris Whalen, chairman of Whalen Global Advisors, told me on Yahoo Finance’s morning briefing. "It's ridiculous to have banks manage their businesses based on whether (Senator) Elizabeth Warren is going to attack them. You can't run a business that way."
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Mac Sykes, portfolio manager at Gabelli Funds, expects deregulation in the banking sector to be a catalyst for the group, telling Yahoo Finance that deregulation will "benefit the banks."
"There's a 10% hit (from the final phase of Basel III), which could turn neutral," Sykes said. He also added that an increase in mergers and acquisitions within the sector would allow smaller players to take advantage of synergies, an outcome that is "undervalued by investors".
Goldman Sachs analyst Joe Ritchie told me last month that the industrial sector was regaining confidence after months of contraction, adding, “Several companies expect better growth in 2025 … It’s just a matter of time.”
HEICO (HEI) co-president Eric Mendelson is among the group's business leaders who believe Trump's policies have boosted investor confidence in the economy, creating a "very positive environment for the industrial sector." environment".
Elon Musk's influence on the incoming administration could be another catalyst. Robert Cardillo, chief strategist at Planet Labs (PL), told me last month at the Goldman Sachs Industrials and Materials Conference that Musk's influence could be "good news" for the industry.
Industry leaders and experts are looking to the incoming administration to create a supportive backdrop for the industry.
"This is constructive in many ways...I think the tax effort is constructive. I hope the regulatory environment is more constructive for the industry as well." Southwest Airlines (LUV) CEO Bob Jordan Bob Jordan) told me last month.
Industry observers are predicting significant changes in the air transportation and aerospace sectors, including plans to scale back the Biden administration's consumer protection initiatives and reduce regulations affecting the commercial space and advanced air transportation industries, according to recent analysis by Pillsbury LLP's aviation team .
“We expect the Trump administration to support small airlines,” write Pillsbury’s Charles Donley, Edward Sauer and Laura Jennings Ochoa Engage in joint ventures, mergers and/or acquisitions to compete more effectively with large U.S. airlines.”
Top industry analysts agree.
Raymond said: "Given the stance of the new government and some of the smaller airlines that are struggling, there is a greater opportunity for M&A now... which is a benefit for the group and certainly more likely than not by 2025. It's higher than what we've seen in the past few years," James' Savanthi Seth told me.
Deadline: January 17, 4:00:02 pm ET
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Big tech leaders are courting President-elect Donald Trump as he plans to loosen regulations and invest heavily in artificial intelligence.
Amazon (AMZN) founder Jeff Bezos, Apple (AAPL) CEO Tim Cook, Alphabet (GOOGL) CEO Sundar Pichai, Meta (META) CEO Mark Zucker Tech leaders such as Berg and Microsoft (MSFT) CEO Satya Nadella have bankrolled Trump's inauguration as big tech companies try to win over the new administration.
Deadline: January 17, 4:00:01 pm ET
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Wedbush's Dan Ives expects the tech sector to be the big winner this year, predicting a "Goldilocks" scenario for big tech companies.
“We expect tech stocks to rise 25% in 2025 as Wall Street further digests the cobwebs of regulatory deregulation with Trump in the White House, the days of Khan/FTC are a thing of the past, and stronger artificial intelligence on the Beltway Plan Smart is coming soon, Ives wrote in a note to clients: "We have a good foundation for Big Tech and Tesla looking forward to 2025 and beyond. "
IBM (IBM) CEO Arvind Krishna told me at a Yahoo Finance investment conference that he hopes the incoming Trump administration will promote "more innovation and less regulation" to lay the foundation for a more favorable trading environment .
"If we have more certainty about the outcome, then we are willing to lean into things like mergers and acquisitions. ... If there is more certainty about the regulatory process and antitrust, then you can take on more risk," Krishna explain.
The incoming administration plans to roll back the Biden administration's electric vehicle policies on day one and threatens tariffs, posing risks to the auto industry.
Tom Donnelly, president and CEO of Mazda's North American operations, told me that doing business would "probably" be more difficult under Trump, given the unpredictability of the administration and the potential for more tariffs. He told Yahoo Finance that Mazda has been doing "scenario planning" for months, including potentially moving some production from Mexico to a plant in Alabama.
“Uncertainty is no good,” Donnelly told me. "It is clear that businesses in any industry cannot afford the magnitude of the issues at issue here."
Since Election Day, Trump has threatened to impose a series of tariffs, starting with a phase-in of 25% on Canadian and Mexican imports and 60% on Chinese goods.
Tariffs in Canada and Mexico, in particular, are expected to be an unresolved issue for the auto industry this year. Evercore's Chris McNally remains "relatively cautious" on the entire legacy auto group until Trump's tariff threats are resolved, warning that earnings will take a hit at some of the industry's biggest players.
"General Motors (GM) has the highest negative EPS exposure to the 25% Mexican tariffs, which if enacted would hit EPS by 45% -" McNally wrote in a note to clients earlier this month. 50% impact.”
GM CEO Mary Barra told Yahoo Finance executive editor Brian Sozzi that tariffs could mean higher vehicle prices and potentially weaker demand.
RBC's Tom Narayan sees Trump's "erratic" behavior as a risk to the industry and expects Trump's tariff threats to "continue to pressure" auto stocks, Until the industry gets some clarity.
Deadline: January 17, 4:00:02 pm ET
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The discount retailer is one of the stocks most exposed to tariffs as the group relies heavily on Chinese imports.
For example, nearly a third of the products sold by Boot Barn (BOOT) are made in China, while 25% are made in Mexico, according to a recent analysis by Bank of America's Christopher Nardone.
Dollar Tree (DLTR) CEO Michael Creedon noted on the company's third-quarter earnings call that the retailer has policies in place to mitigate tariff-related risks, including the ability to "completely eliminate this product."
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Trump's promises of mass deportations and tariffs pose risks to the construction industry.
"Higher tariffs on Canada and Mexico and mass deportations of undocumented immigrants could increase material and labor costs. Higher tariffs on China could slow its economy, causing land developers to slow investment," S&P Global Ratings said in a recent report wrote in the report.
The research team noted that softwood lumber used to construct building frames is typically imported from Canada, while drywall and cement component gypsum are typically imported from Mexico and Canada.
That sentiment was echoed by Joel Berner, senior economist at Realtor.com, who warned that rising costs will slow construction activity.
"The incoming Trump administration's policy initiatives, including tariffs on imported goods, including construction materials, and mass deportations will impact the builder's workforce as builders slow their startups," Berner said. new construction projects, these policy initiatives will certainly make a difference,” wrote.
Sean Smith is the anchor of Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on a deal, merger, activist situation, or anything else? Email seanasmith@yahooinc.com.
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