Investment Sectors to Watch: Winners and Losers Under Trump’s Policies

Introduction

The return of Donald Trump to the White House marks a significant shift in economic policies, with potential ripple effects across various industries. Investors must stay attuned to key policy changes, including deregulation, tax reforms, and trade policies, to identify which sectors will thrive and which may struggle. Historically, Trump’s first term favored industries such as fossil fuels, defense, and financial services, while technology and import-heavy sectors faced challenges. In this chapter, we analyze the likely winners and losers under Trump 2.0 and discuss strategic approaches for investors looking to position their portfolios accordingly.

Nonrenewable Energy

Under Trump’s first term, energy deregulation played a crucial role in boosting fossil fuel production, and a similar trend is expected in his second presidency. Policies aimed at expanding domestic oil and gas drilling, reviving coal plants, and reducing environmental regulations could create a favorable environment for traditional energy companies. Investors can expect a potential resurgence in stocks related to oil exploration, refining, and pipeline infrastructure.

Notable Stocks

• ExxonMobil (XOM)
• Chevron (CVX)
• ConocoPhillips (COP)
• Halliburton (HAL)
• Peabody Energy (BTU) (Coal)

ETFs to Consider

• Energy Select Sector SPDR Fund (XLE)
• VanEck Oil Services ETF (OIH)

Defense & Aerospace

Trump has long emphasized a strong national defense, advocating for increased military spending and advanced weapons development. With growing geopolitical tensions and ongoing international conflicts, defense contractors and aerospace firms stand to benefit from government contracts. Companies specializing in military technology, cybersecurity, and space defense could see significant gains.

Notable Stocks

• Lockheed Martin (LMT)
• Northrop Grumman (NOC)
• Raytheon Technologies (RTX)
• General Dynamics (GD)
• Boeing (BA)

ETFs to Consider

• iShares U.S. Aerospace & Defense ETF (ITA)
• SPDR S&P Aerospace & Defense ETF (XAR)

Infrastructure & Construction

One of Trump’s key promises during his initial campaign was a focus on revitalizing America’s infrastructure, and this priority is expected to continue. Proposed spending on roads, bridges, airports, and broadband expansion could provide significant opportunities for construction and engineering firms. Cement and steel manufacturers may also see increased demand as large-scale government projects take shape.

Notable Stocks

• Caterpillar (CAT)
• Vulcan Materials (VMC) (Cement & Aggregates)
• United Rentals (URI) (Equipment Rentals)
• Nucor (NUE) (Steel)
• Martin Marietta Materials (MLM) (Construction)

ETFs to Consider

• Global X U.S. Infrastructure Development ETF (PAVE)
• iShares U.S. Infrastructure ETF (IFRA)

Financials & Banking

A Trump presidency is likely to favor financial deregulation, benefiting major banks and lending institutions. Easing restrictions on Wall Street and rolling back certain Dodd-Frank regulations could lead to increased profitability for banks through greater lending activity and mergers and acquisitions. Additionally, potential corporate tax cuts would further boost financial institutions’ earnings.

Notable Stocks

• JPMorgan Chase (JPM)
• Bank of America (BAC)
• Goldman Sachs (GS)
• Wells Fargo (WFC)
• Charles Schwab (SCHW)

ETFs to Consider

• Financial Select Sector SPDR Fund (XLF)
• iShares U.S. Financials ETF (IYF)

Losing Sectors

Technology

Trump has been vocal about his opposition to major technology companies, criticizing them for perceived censorship and monopolistic practices. With heightened scrutiny on social media platforms, data privacy concerns, and potential antitrust actions, large tech firms could face regulatory challenges. Restrictions on Chinese tech investments and supply chains could also pose risks for companies reliant on international partnerships.

At-Risk Stocks

• Meta Platforms (META)
• Alphabet (GOOGL)
• Amazon (AMZN)
• Apple (AAPL)
• Microsoft (MSFT)

ETFs to Avoid or Monitor Closely

• Technology Select Sector SPDR Fund (XLK)
• Vanguard Information Technology ETF (VGT)

Renewable Energy & Electric Vehicles

The renewable energy sector flourished under Biden’s administration, with extensive government subsidies and policies favoring wind, solar, and electric vehicle (EV) production. However, Trump’s policies are likely to shift government support away from clean energy in favor of traditional fossil fuels. The rollback of EV tax credits and renewable energy incentives could slow growth in these industries, making stocks in solar, wind, and EV manufacturing more volatile.

At-Risk Stocks

• Tesla (TSLA)
• NextEra Energy (NEE) (Renewables)
• Sunrun (RUN) (Solar)
• Enphase Energy (ENPH) (Solar Inverters)
• ChargePoint Holdings (CHPT) (EV Charging)

ETFs to Avoid or Monitor Closely

• Invesco Solar ETF (TAN)
• iShares Global Clean Energy ETF (ICLN)

Import-Heavy Industries (Retail, Manufacturing)

Protectionist policies, including tariffs on Chinese goods and renegotiated trade agreements, could once again create challenges for businesses reliant on global supply chains. Retailers, electronics manufacturers, and automakers that depend on imported components may face increased costs, leading to higher prices for consumers and potential profit margin squeezes.

At-Risk Stocks

• Walmart (WMT)
• Target (TGT)
• Nike (NKE)
• Apple (AAPL) (Due to reliance on China)
• General Motors (GM) (Automotive Manufacturing)

ETFs to Avoid or Monitor Closely

• Consumer Discretionary Select Sector SPDR Fund (XLY)
• iShares Global Consumer Discretionary ETF (RXI)

Investment Strategies

Given these sectoral shifts, investors must adapt their strategies to align with new economic realities. Those looking to capitalize on winning industries may consider increasing exposure to energy, defense, and infrastructure-related assets. ETFs and mutual funds targeting these sectors can provide diversified access to growth opportunities.

For those holding investments in vulnerable industries such as tech, renewables, and import-heavy businesses, a more defensive approach may be necessary. Diversification into international markets, value stocks, or commodities like gold and silver could help hedge against policy risks. Additionally, keeping an eye on interest rate movements and inflation trends will be crucial for making informed investment decisions.

Conclusion

The Trump 2.0 era presents both risks and opportunities for investors, depending on how policies unfold. While deregulation and increased government spending could benefit certain sectors, protectionist trade measures and regulatory crackdowns could pose challenges for others. Navigating this evolving landscape requires a keen understanding of policy shifts, market trends, and diversification strategies. By staying informed and flexible, investors can position themselves to not only withstand volatility but also capitalize on emerging opportunities in the years ahead.