Now it looks like the so-called “Trump Trade” is gaining steam, as investors prepare for the potential economic and market effects of Trump as the 47th President of the United States.
But what is the Trump Trade, and what does it mean for the market?
What Is the Trump Trade?
The Trump Trade refers to the market’s behaviors and how investors trade in response to the promise of a second Trump administration. Trump, a former real estate mogul who has crashed and burned in a number of other ventures, was very friendly to business interests as president.
One of Trump’s signature achievements was signing the Tax Cuts and Jobs Act (TCJA) of 2017, which slashed the federal corporate income tax rate from 35 percent to 21 percent. The law enabled at least 87 firms to pay effective tax rates in the single-digits or less, with 55 of those firms — including Netflix and Salesforce — paying less than 5 percent between 2018 and 2022, according to the Institute on Taxation and Economic Policy. Twenty-three firms paid zero or less federal income tax between that four year period.
Trump, meeting in June with about 100 business leaders including JPMorgan Chase CEO Jamie Dimon and Apple chief Tim Cook, promised to cut the corporate tax rate even further, to 20 percent. He also promised to make permanent the 2017 tax cuts, which are poised to expire in 2025, and renew cuts for individuals and small businesses.
A second Trump presidency would also likely mean looser regulations and higher tariffs on foreign imports. After Biden quadrupled tariffs on Chinese electric vehicles, Trump called for similar measures “on a lot of other products.”
Within the first 100 days of his presidency, Trump overturned several bills related to consumer or labor protections, such as the Fair Pay and Safe Workplaces Act. He later rescinded regulations in several other areas, including rules ensuring that the U.S. pork supply is safe to eat. More than 100 environmental rules were rolled back during his first term, The New York Times reports.
Who Are the Winners?
Some big beneficiaries of a second Trump presidency are expected to be healthcare, bank, cryptocurrency, and oil stocks.
Although he was once a harsh critic, Trump has emerged as a major supporter of Bitcoin in recent months, declaring himself the pro-crypto candidate. His campaign also now accepts donations in Bitcoin, Ether, Dogecoin, Solana, and other cryptocurrencies. Trump has said he wants all Bitcoin to be mined in the U.S. and plans to speak at the Bitcoin Conference in Nashville later this month.
The oil industry is also expected to benefit from a potential Trump presidency, after backing the former president in both his 2020 reelection campaign and 2024 campaign. In May, Trump reportedly offered to gut Biden’s pro-environment and EV policies in return for $1 billion in campaign contributions.
Goldman Sachs has identified 34 stocks that could outperform the market in a Trump presidency, primarily because they generate all their sales in the U.S. market. They include telecommunications stocks like Charter Communications and T-Mobile, retailers like Target and Lowe’s, and the bank Wells Fargo.
Another possible winner is Tesla.
While Trump has taken a hardline stance against EVs, CEO Elon Musk formally endorsed the former president after the assassination attempt on Saturday. Musk has with Trump in recent months. Musk also donated to the pro-Trump America PAC last week, Bloomberg reports. Dan Ives, a longtime Tesla bull and Wedbush Securities analyst, has called a Trump presidency “bullish” for the stock, but negative for EVs.
And of course, a Trump presidency would likely be a major boon for Trump Media and Technology Group, the owner of Trump’s social media site Truth Social. The company is widely considered a meme stock, often rising and falling whenever any good or bad news concerning the former president surfaces.
Who Are the Losers?
The biggest losers would likely be companies focusing on clean energy, such as solar, and companies that rely heavily on foreign trade or are themselves foreign but trade in the U.S.
Trump has been critical of clean energy and Biden’s Inflation Reduction Act, which offers tax credits for solar panel installation and EV purchases. If Trump takes over in January and axes those incentives, the solar and EV industries could feel some pain.
The Invesco Solar ETF and SolarEdge Technologies stock were both facing heavy losses Monday, partially thanks to a perceived greater chance for a Trump victory. SolarEdge stock was also down because it announced its second round of layoffs this year, citing a downturn in the market and wider industry. Other solar stocks including SunPower, First Solar, and SunRun also fell Monday.
Shares of Vestas Wind Systems, a Danish manufacturer and installer of wind turbines, fell by more than 6 percent Monday. Stock in fellow Danish firm Ørsted A/S, a major developer of offshore wind power, was also down.
Trump has pledged to scrap offshore wind projects on “day one” and has frequently railed against wind energy. He has also falsely claimed that windmills cause cancer, spew “tremendous fumes” during construction, and are “driving whales crazy.”
This article was originally published in Quartz. Distributed by Tribune Content Agency, LLC.
