Investors are bracing for a bumpy ride as President-elect Donald Trump’s second term begins Monday, bringing promises of significant policy changes — including lighter regulations and tax cuts.
Those two priorities have Wall Street upbeat, while slowing inflation and strong earnings have also fueled investor optimism. Last week, the S&P 500 (^GSPC) achieved the best weekly performance since the election. Since November 5, the S&P 500 has climbed 3.6%.
However, some areas of the market could be at risk, as Trump’s unpredictable approach is expected to cause market volatility.
In recent weeks, I’ve spoken with several top Wall Street CEOs and analysts about what Trump 2.0 means for companies and investors. Here’s what they told me about the expected impact of the new administration on various sectors.
Finance is considered a top business as investors bet on looser regulation and increased M&A activity. Just this week, the nation’s largest banks reported a rise in corporate profits.
“There has been a significant shift in CEO confidence, particularly following the US election results,” Goldman Sachs (GS) CEO David Solomon said at the bank’s earnings call. “It seems like we have the wind at our backs in 2025.”
Meanwhile, JPMorgan (JPM) CFO Jeremy Barnum cited a “significant increase in optimism in the overall environment,” telling reporters after the bank’s earnings results that “we are currently in a bullish moment.”
“We need to have a more level-headed, less volatile regulatory environment,” Chris Whalen, president of Whalen Global Advisors, told me in Yahoo Finance’s Morning Brief. “Banks manage their business whether they want to or not [Senator] Whether Elizabeth Warren will attack them or not is absurd. You can’t run a business that way.”
Gabelli fund portfolio manager Mac Sykes expects looser oversight of the banking industry to be a catalyst for the group, telling Yahoo Finance that deregulation will “benefit the banks”.
“A 10 percent hit was coming [from Basel III endgame]and that will probably go to neutral,” Sykes said. He also added that increased mergers and acquisitions within the sector will allow smaller players to take advantage of synergies, an outcome that investors are “underestimating”.
Goldman Sachs analyst Joe Ritchie told me last month that the industrial sector is gaining confidence after months of contraction, adding that “several companies expect better growth in 2025. … It’s just a matter of time before that happens.”
HEICO (HEY) co-chairman Eric Mendelson is one of the group’s business leaders who believe Trump’s policies are boosting investor confidence in the economy, creating a “very positive environment” for the industrial sector.
And Elon Musk’s influence on the next administration could be another catalyst. Robert Cardillo, chief strategist at Planet Labs (Pl), he told me last month on Goldman Sachs Conference on Industry and Materials that Musk’s influence is likely to be “good news” for the sector.
Industry leaders and experts expect the new administration to create support for the sector.
“It’s constructive in many ways…I think the tax effort is constructive. I hope the regulatory environment is also more constructive for the industry,” Southwest (LUV) CEO Bob Jordan he told me last month.
Industry watchers predict significant changes to the airline and aviation sector, including plans to scale back the Biden administration’s consumer protection initiatives and reduce regulations affecting the commercial space and advanced air mobility industries, according to recent analysis from the aviation team of the Pillsbury law firm.
“We expect the Trump administration to support joint ventures, mergers and/or acquisitions by smaller airlines to compete more effectively with larger US airlines,” Charles Donley, Edward Sauer and Laura Jennings Ochoa of Pillsbury wrote.
That sentiment is echoed by top industry analysts.
“Between the new administration’s stance, as well as some of the smaller struggling airlines, there’s now a greater chance for M&A … that’s an advantage for the group and definitely more likely in 2025 than what we’ve seen in the last few years,” Raymond James Savanthi Syth he told me.
Big tech leaders are cheering President-elect Donald Trump on his plans to roll back regulations and invest heavily in AI.
Amazon (AMZN) founder Jeff Bezos, Apple (AAPL) CEO Tim Cook, Alphabet (GOOGLE) CEO Sundar Pichai, Meta (TARGET) CEO Mark Zuckerberg and Microsoft (MSFT) CEO Satya Nadella is among the tech leaders who have contributed funds to Trump’s inaugural campaign as Big Tech tries to win the support of the new administration.
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Wedbush’s Dan Ives expects the technology sector to be the big winner this year, predicting a “Goldilocks” scenario for Big Tech.
“We expect tech stocks to rise 25% in 2025 as the Street continues to digest the less regulatory cobweb under a Trump White House with the Khan/FTC days in the rearview mirror, stronger AI initiatives within the Beltway on the way, and a golden foundation for Big Tech and Tesla that they are looking at 2025 and beyond,” Ives wrote in a note to clients.
IBM (IBM) CEO Arvind Krishna told me at Yahoo Finance Invest conference that he hopes the new Trump administration will encourage “a lot more innovation and less regulation,” laying the groundwork for a more favorable deal environment.
“If we’re more confident about the outcome, we’re willing to go along with things like mergers and acquisitions. … If the regulatory process and antitrust is going to be more secure, it allows you to take more risk,” Krishna said.
The new administration’s plans to roll back the Biden administration’s EV policies on Day 1, along with threats of tariffs, pose a risk to the auto sector.
Tom Donnelly, president and CEO of Mazda North American Operations, told me it’s “potentially” harder to do business under Trump given the unpredictability surrounding his administration and the potential for more tariffs. He told Yahoo Finance that Mazda had been “planning the scenario” for months, which includes potentially moving some production from Mexico to the Alabama plant.
“Uncertainty is not helpful,” Donnelly told me. “What is clear is that no business in any industry can absorb the magnitude of what is being discussed here.”
Since Election Day, Trump has threatened a series of tariffs, ranging from gradual implementation to 25% tariffs on imports from Canada and Mexico and 60% tariffs on Chinese goods.
Tariffs for Canada and Mexico, in particular, are expected to be an upgrade for the auto sector this year. Evercore’s Chris McNally remains “relatively cautious” on the legacy auto group as a whole until there is a resolution on Trump’s tariff threats, warning of falling earnings for some of the industry’s biggest players.
“General Motors (GM) has the largest negative EPS exposure to Mexico’s 25% tariff in a huge range of 45%-50% EPS if applied,” McNally wrote in a note to clients earlier this month.
of RBC Tom Narayan sees Trump’s “erratic” behavior as a risk to the industry and expects Trump’s threat of tariffs to “continue to pressure” auto stocks until the industry gets some clarity.
The discount retailer is among the stocks most at risk from tariffs, as the group relies heavily on Chinese imports.
For example, almost a third of the products sold at Boot Barn (BOOT) are produced in China, while 25% are produced in Mexico, according to a recent analysis by Bank of America’s Christopher Nardone.
dollar tree (DLTR) Chief Executive Officer Michael Creedon noted on the company’s third-quarter earnings call that the retailer has policies in place to mitigate the risks associated with the tariffs, including the possibility of “total product elimination.”
Construction
Trump’s promise of mass deportations, along with tariffs, poses a risk 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 investment by construction companies to slow,” S&P Global Ratings wrote in a recent note.
The team notes that softwood lumber, used for building frames, is often imported from Canada, while gypsum for the drywall and cement component is often imported from Mexico and Canada.
And that sentiment was echoed by Realtor.com Senior Economist Joel Berner, who warned that higher costs will slow construction activity.
“The policy initiatives of the incoming Trump administration, which has promised tariffs on imported goods that include construction materials and mass deportations that will affect the construction workforce, have certainly come into play as builders slow down in terms of starting new construction projects,” Berner wrote.
Sean Smith is an anchor in Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on jobs, mergers, activism situations or anything else? Email seanasmith@yahooinc.com.
