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With Donald Trump back in the White House after the 2024 election, many are curious about how his presidency might impact the markets. Based on his past policies and campaign promises, certain sectors could see significant growth.
Let’s chat about which industries might benefit, why they matter, and what specific policies could boost them—even throwing in some numbers to give you a clearer picture.
Energy Sector
Why It Matters
The energy sector is a critical component of the global economy, accounting for approximately 2.3% of the U.S. GDP as of 2023. It influences virtually all other sectors through its role in powering industries, transportation, and households. The U.S. is one of the world’s largest energy producers, with oil and natural gas being significant contributors.
Reasons for Optimism
- Historical Production Increases: During Trump’s previous term (2017-2021), U.S. crude oil production increased by about 27%, from 8.9 million barrels per day in 2016 to 11.3 million barrels per day in 2020.
- Job Growth Potential: The fossil fuel industry supports approximately 10 million U.S. jobs, directly and indirectly.
- Export Opportunities: The U.S. became a net exporter of oil in 2020, with exports reaching 8.5 million barrels per day.
Potential Policies That Could Come Once Trump Takes Charge
- Deregulation Efforts: Reversing environmental regulations, such as methane emission rules, could reduce compliance costs by up to $100 million annually for oil and gas companies.
- Pipeline Approvals: Advancing projects like the Keystone XL Pipeline, which was projected to create over 42,000 jobs and contribute $3.4 billion to the U.S. GDP during construction.
- Expanding Drilling Rights: Opening federal lands and offshore areas for exploration could tap into an estimated $50 trillion worth of untapped oil and gas reserves.
Potential Beneficiaries
- Exxon Mobil Corporation (XOM): Market Cap of $350 billion; could benefit from increased drilling and export opportunities.
- Chevron Corporation (CVX): Market Cap of $200 billion; stands to gain from deregulation and expanded exploration.
- Peabody Energy Corporation (BTU): Leading coal producer that could see growth from relaxed environmental policies.
Defense and Aerospace
Why It Matters
The defense sector is vital for national security and technological advancement. In 2023, the U.S. defense budget was approximately $916 billion, representing about 3.7% of GDP. The industry employs over 2.5 million people, including military personnel and civilians.
Reasons for Optimism
- Increased Budget Allocations: During Trump’s previous term, defense spending increased by 19%, from $606 billion in 2016 to $721 billion in 2020.
- Modernization Programs: Emphasis on updating military equipment, including the procurement of 100 new F-35 fighter jets annually at a cost of $89 million per jet.
- Space Force Development: The establishment of the Space Force added a new branch with a budget of $15.4 billion in 2023.
Potential Policies That Could Come Once Trump Takes Charge
- Further Budget Increases: Proposing defense budgets exceeding $800 billion, potentially boosting industry revenues by 10-15%.
- Advanced Weapons Systems: Investment in hypersonic missiles, projected to cost $3.2 billion over the next five years.
- Cybersecurity Enhancements: Allocating an additional $9.8 billion for cybersecurity defense measures.
Potential Beneficiaries
- Lockheed Martin Corporation (LMT): Revenue of $65.4 billion in 2022; primary contractor for the F-35 program.
- Northrop Grumman Corporation (NOC): Revenue of $36.8 billion; involved in space and missile defense systems.
- Raytheon Technologies Corporation (RTX): Revenue of $64.4 billion; specializes in defense electronics and missile systems.
Financial Services
Why It Matters
The financial sector is the lifeblood of the economy, facilitating investments, loans, and financial planning. It contributes approximately 20.7% to the U.S. GDP, equating to about $5.5 trillion.
Reasons for Optimism
Deregulation: Trump’s administration is anticipated to ease regulations that have constrained banks. Analysts predict that the rollback of the Basel III Endgame requirements, which would have mandated large banks to maintain a capital ratio of 9% to 19%, could be completely abandoned. Currently, large banks must maintain a minimum capital ratio of 4.5%
Profit Margin Expansion: Higher interest rates could increase net interest margins by 20 basis points, significantly boosting profits.
Economic Growth: Stimulative policies could increase loan demand, with commercial and industrial loans potentially growing by 5-7% annually.
Potential Policies That Could Come Once Trump Takes Charge
Dismantling Dodd-Frank Act Provisions: Reducing capital requirements could free up to $100 billion for lending and investment.
Corporate Tax Cuts: Reducing the corporate tax rate from 21% to 15% could increase bank earnings by up to 10%.
Interest Rate Influence: Policies leading to higher interest rates could improve bank profitability, with a 1% increase potentially raising net income by $10 billion across major banks.
Potential Beneficiaries
- JPMorgan Chase & Co. (JPM): Assets exceeding $3.7 trillion; could leverage deregulation for expansion.
- Goldman Sachs Group, Inc. (GS): Net earnings of $21.6 billion in 2022; stands to benefit from increased trading and investment activities.
- Wells Fargo & Company (WFC): Assets of $1.9 trillion; potential growth from eased lending restrictions.
Manufacturing and Industrial Goods
Why It Matters
Manufacturing contributes approximately 11% to the U.S. GDP, amounting to $2.3 trillion. It employs over 12 million workers, representing 8.5% of the workforce.
Reasons for Optimism
- Reshoring Trends: From 2010 to 2020, over 750,000 manufacturing jobs were reshored.
- Trade Balance Improvement: Reducing imports could decrease the trade deficit, which stood at $678.7 billion in 2020.
- Technological Advancements: Investment in automation and robotics projected to grow at 14% CAGR through 2025.
Potential Policies That Could Come Once Trump Takes Charge
- Tariffs on Imports: Imposing tariffs up to 25% on certain goods could incentivize domestic production.
- Tax Incentives: Offering tax credits up to 10% for companies that relocate manufacturing to the U.S.
- Buy American Initiatives: Mandating federal agencies to purchase U.S.-made products, potentially increasing domestic sales by $100 billion.
Potential Beneficiaries
- 3M Company (MMM): Revenue of $32.2 billion; diversified manufacturer with a focus on U.S. production.
- Deere & Company (DE): Revenue of $44 billion; leading manufacturer of agricultural machinery.
- General Electric Company (GE): Revenue of $79.6 billion; poised to benefit from increased industrial activity.
Pharmaceuticals and Biotechnology
Why It Matters
The pharmaceutical industry is a significant contributor to the U.S. economy, with revenues of $800 billion in 2022. It is crucial for public health and innovation.
Reasons for Optimism
- R&D Investment: The industry invests over $80 billion annually in research and development.
- Market Growth: The global pharmaceutical market is expected to reach $1.5 trillion by 2025.
- Aging Population: By 2030, 20% of the U.S. population will be over 65, increasing demand for medications.
Potential Policies That Could Come Once Trump Takes Charge
- FDA Reforms: Accelerating drug approval processes could reduce time-to-market by 6-12 months, saving companies up to $500 million per drug.
- Tax Incentives for R&D: Increasing R&D tax credits from 14% to 20%, encouraging innovation.
- Opposition to Price Controls: Preventing policies that could reduce industry revenues by an estimated $150 billion over a decade.
Potential Beneficiaries
- Pfizer Inc. (PFE): Revenue of $81.3 billion in 2022; extensive pipeline of drugs.
- Johnson & Johnson (JNJ): Revenue of $93.8 billion; diversified healthcare company with strong pharmaceutical segment.
- Merck & Co., Inc. (MRK): Revenue of $48 billion; leading in oncology and vaccine development.
Technology and Cybersecurity
Why It Matters
Technology is the backbone of the modern US economy, driving innovation, productivity, and national security.
Reasons for Optimism
- Increased Government Investment: A Trump administration might prioritize national security and technological dominance, leading to higher investments in technology and cybersecurity, resulting in more government contracts for tech companies.
- Support for Emerging Technologies: Focus on promoting American leadership in technologies like 5G, AI, blockchain, and cryptocurrencies, fostering innovation.
- Potential Regulatory Clarity for Crypto: Introducing regulations that provide clarity for the cryptocurrency industry, potentially boosting adoption and investment.
Potential Policies That Could Come Once Trump Takes Charge
- Enhanced Cybersecurity Funding: Increasing federal cybersecurity budgets by 15% (about $2.5 billion annually) to protect critical infrastructure and government networks.
- Investment in Emerging Tech: Implementing tax incentives, grants, and relaxed regulations to encourage development in AI, 5G, quantum computing, and blockchain technologies—for example, offering R&D tax credits up to 20%.
- Crypto-Friendly Regulations: Recognizing cryptocurrencies as legitimate financial instruments, reducing regulatory hurdles and taxation complexities by:
- Simplifying tax treatment, potentially treating cryptocurrencies like foreign currencies.
- Establishing clear regulatory frameworks for crypto exchanges and ICOs.
- Encouraging blockchain adoption through government grants or contracts.
Potential Beneficiaries
- Microsoft Corporation (MSFT): Could see a 10–15% increase in government segment revenues (adding $2–3 billion annually) due to its strong presence in cloud computing (Azure), AI, and cybersecurity.
- Cisco Systems, Inc. (CSCO): A 10% increase in government spending on network security could translate to $500 million in additional revenue for this networking and cybersecurity leader.
- NVIDIA Corporation (NVDA): Increased investment in AI and data centers could boost data center revenues by 20%, adding over $1.3 billion annually.
- Coinbase Global, Inc. (COIN): Regulatory clarity and increased crypto adoption could lead to a 30% rise in crypto market activity, significantly boosting transaction revenues.
- Advanced Micro Devices, Inc. (AMD): Increased investment in technology infrastructure could drive a 15% growth in their enterprise segment revenues.
Wrapping Up
A Trump win in 2024 could reshape many sectors. These include energy, defense, finance, infrastructure, manufacturing, pharmaceuticals, and technology. The changes would likely involve less regulation, more government spending, and business-friendly policies.
Investors can better prepare by understanding the numbers and policies. However, they should stay cautious due to the inherent uncertainties in political outcomes and policy implementations.
Note: Any securities mentioned in this article are provided for illustration or examples only, for the limited purpose of analyzing the general market or economic conditions, and may not form the basis for an investment decision. Discussion of securities in this article are strictly for educational use only and are not intended to serve as investment advice.
