Everyone is asking the same question, "What stocks or sectors do I own if former President Trump is reelected in November?"
Our answer is to keep it macro on a sector and/or thematic level. It is still early in the election process, and there is no hurry in trying to beat the crowd to buy what you think is going to work in 2025 and beyond.
First, we need to understand how the stock and bond market did during Trump's first term in comparison to President Biden's first term. Here are the statistics on the returns of the S&P 500, NASDAQ Composite, Russell 2000 and the 20-Year Treasury Bond during the presidency of Trump and Biden. Trump returns start at the close of November 2016 trading and end in January of 2021. Biden returns are from the close of November 2020 to current, through July 16th.
- S&P 500: Trump 69.29% and Biden 56.48%
- NASDAQ Composite: Trump 145.52% and Biden 51.73%
- Russell 2000 (Small Cap): Trump 56.81% and Biden 24.89%
- 20-Year Treasury Bond: Trump 29.17% and Biden -40.31%
There you have it. If you were an investor, then you did much better under Trump than Biden. Will that continue in 2025 through 2028? There are several things to consider to help with the selection process.
1.) First, will the Trump tax cuts be rolled back? For individuals, they will be rolled back at the end of 2025. Corporate tax cuts are permanent. This is a plus for the stock market. To keep the tax cuts beyond 2025, they will need to be extended by Congress and the president. If the Republican sweep the elections, then this will be easy. If no sweep, then this becomes harder to get done.
2.) Second, If the economy were to go into a recession at the end of 2025, that would be like pouring gasoline on to a fire. A tax increase would make the recession worse. If this happened, then you would want to own bonds as rates would drop. Buy bonds, build America.
Whoever is president in 2025 will get the benefit of the Federal Reserve cutting interest rates. Such an action will help the economy get through a slow period of time, which is natural after the growth seen post pandemic. Again, buy bonds. Bonds could put in their fourth down year in a row so a rebound is imminent. Once on the backside of a recession, the consumer will benefit from lower rates
Trump will likely keep his tariffs in place against China as Biden never rescinded them. He may expect tariff actions against others so this must be watched. .
3.) Third, Trump will also more than likely open up offshore drilling and reverse the Biden administration's attempt to curtail drilling in the U.S. A Trump victory would benefit not only energy companies but also the price that consumers are having to pay for gasoline, $1.84 under Trump during his first term and the doubling of the price at the pump to $3.70 nationally as we hit summer travel in 2024 under Biden.
Surprisingly enough, energy stocks did not well under Trump, as they fell in in every year of Trump's four years in office. So it would not be good to own energy stocks, but it would be good for the consumer as we have already pointed out. Also, Trump would more than likely end Biden's electric vehicle mandate, which could put in a peak for EV cars and increase demand for gasoline.
4.) Fourth, Trump has turned positive on crypto, and that should do well along with certain sectors of technology. Mega Tech may be in trouble under a second Trump administration. Trump could channel his inner Teddy Roosevelt and bust them up over antitrust concerns. Smaller tech would benefit from this, however, and Trump is receiving lots of backing from powerful Big Tech leaders like Elon Musk, Peter Thiel and venture capital players.
5.) Fifth, Trump would probably continue to improve on Biden's Infrastructure Bill, which is turning into a great piece of legislation that is seeing little shovel-ready production. This would benefit stocks in the Industrial and Material space.
Related to infrastructure, clearly, Trump would also seek to build back up the Military Industrial Complex that has seen weapons inventory depleted given use by our allies in several recent conflicts.
For now, this should provide an early start at potential investments under a new regime in the White House.
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Geoff Garbacz is a principal at Quantitative Partners, Inc. and works with several independent research firms that work with buyside clients, financial advisors and institutional investors.