Financial Association reported on November 11 (Editor, Huang Junzhi) For investors, after Donald Trump announced his victory, the initial risk appetite rebounded rapidly in the US stock market. But now investors are starting to wonder: Who will be the next winner in the "Trump 2.0" era of the US stock market?

As a background, Trump made many promises during the campaign: high tariffs, tax cuts, business-friendly relaxation of regulations and comprehensive deportation of immigrants, etc. For investors who poured into the stock market last week speculating that Trump's policies would boost the economy, the challenge lies in figuring out which industries will receive lasting boosts.

For example, tariffs may reignite inflation, damage large multinational companies, while benefiting domestic small-cap stocks. Crackdowns on immigration may increase labor costs and potentially squeeze small businesses.

At the same time, a friendly stance towards increasing production of traditional energy may push down oil prices, and he will also try to reverse President Biden’s policies aimed at helping the clean energy and electric car industries.

"I expect active investors to start selectively screening industries to see which companies and industries may benefit now," said Eric Clark, portfolio manager at investment consultancy Accuvest Global Advisors: "As time goes on, we will gain more insights into the actual implementation and how data points play out."

Clark said he had seized some opportunities. As banks, industrial, energy, and large tech stocks lifted the stock market on Wednesday, he sold some tech and financial stocks. He also bought stocks in luxury goods retailers and basic consumer goods categories, which were in the red when the market surged.

Who will benefit?

Small cap stocks rebounded last week, seeming to be in a favorable position as traders assess potential policy backgrounds. Most of these companies derive the majority of their revenue domestically and will benefit from the rise in protectionism. Additionally, potential corporate tax cuts will also be helpful.

Trump proposed comprehensive tariffs of 10% to 20% on imported goods, with tariffs as high as 60% on goods manufactured in china. The prospect of at least partial implementation of these tariffs drove the Russell 2000 Index up 8.6% last week. Digital payment company Sezzle Inc. was one of the companies with the largest gains in this index, doubling its stock price during this period.

Financial stocks are also seen as being in a strong position because Trump has promised to reform regulatory institutions that implement stricter banking rules under Biden's leadership. As Wells Fargo & Co. banking analyst Mike Mayo pointed out, a new era of regulatory easing may increase Wall Street's profitability.

Stock prices of Citigroup Inc., Goldman Sachs Group Inc., and JPMorgan Chase & Co. soared after Trump's victory.

Barclays' US stock strategist Venu Krishna stated, "The US stock market is eager to digest Trump's domestic growth policies through small-cap stocks and hopes to enjoy the benefits of regulatory relaxation by betting on financial and large technology stocks."

According to analysis, industrial and machinery companies like Caterpillar Inc. are expected to benefit from domestic production of energy and commodity commodities.

Jefferies financial analyst Stephen Volkmann reiterated that Caterpillar Inc. is his top choice in the industry, partly because the company has limited business operations in china.

He also stated that US industrial and fastener dealers like Fastenal Co. and American industrial supply company WW Grainger Inc. have a good track record in passing on increased costs due to tariff hikes.

Finally, the prospect of cracking down on immigration is a potential downside factor that investors are closely watching. However, some companies may benefit from it, such as CoreCivic Inc. and GEO Group Inc., private prison operators.

The outlook remains uncertain.

At the same time, some on Wall Street are skeptical about certain market trends post-election.

Given Trump's pro-oil stance, traditional energy stocks including oil and gas companies surged significantly after Trump's election. However, industry observers warn that efforts to loosen regulations and allow more fossil fuel extraction on public lands could lead to oversupply, driving prices down.

Regarding Trump's tariff plan, Clark noted that some consumer goods companies appear attractive, as any tariff increase may not treat all companies equally.

"I'm not too worried about European luxury brands such as LVMH, Hermes International, L'Oreal, Ferrari, etc., being subjected to high tariffs," he added.

As for another industry (clean energy and renewable energy) which suffered heavy losses last week, the situation is equally complex. iShares Global Clean Energy ETF had its worst week since March.

However, the outlook may not be as dire. Trump has indicated his intention to 'stop' the Inflation Reduction Act, especially the provision of a $7,500 tax credit for electric cars. But analysts believe the likelihood of a complete halt is slim.

Mary Powell, CEO of Sunrun, the largest residential solar company in the USA, stated last week that it is "extremely unlikely" to completely abolish the Inflation Reduction Act and cancel tax credits for industries like solar energy.

"Americans want and need affordable and reliable energy, while the Inflation Reduction Act is actually boosting economies in many states across the nation, including many Republican-leaning states," she said.

Christopher Dendrinos, an analyst at Royal Bank of Canada Capital Markets (RBC Capital Markets), expressed that amidst investors waiting for clarity, the specter of this shift will pose a threat to the industry.

"On the other hand, people expect policy changes to take a long time to pass, and even longer to implement, weakening the overall impact and possibly changing again after the next administration takes office," he added.

Dendrinos mentioned that other factors of Trump's policies might even help some stocks. The analyst expects that due to protectionist agendas and strong domestic demand, the performance of First Solar Inc. and energy company Fluence Energy Inc. will outperform peers.

Editor / jayden