Connect with us

Personal Finance

How President-elect Trump may impact investors in these 8 market sectors

Published

on

Brandon Bell | Getty Images News | Getty Images

As Inauguration Day nears, investors are trying to unravel what booms or busts lay ahead under President-elect Donald Trump.

Trump’s campaign promises — from tariffs to mass deportations, tax cuts and deregulation — and his picks to lead federal agencies suggest both risks and rewards for various investment sectors, according to market experts.  

Republican control of both chambers of Congress may grant Trump greater leeway to enact his pledges, experts said. However, their scope and timing is far from clear.

More from FA Playbook:

Here’s a look at other stories impacting the financial advisor business.

“There’s so much uncertainty right now,” said Jeremy Goldberg, a certified financial planner, portfolio manager and research analyst at Professional Advisory Services, which ranked No. 37 on CNBC’s annual Financial Advisor 100 list.

“I wouldn’t be making large bets one way or another,” Goldberg said.

Sectors often fare differently than expected

Past market results show why it’s difficult to predict the sectors that may win or lose under a new president, according to Larry Adam, chief investment officer at Raymond James.

When Trump was elected in 2016, financials, industrials and energy outperformed the S&P 500 in the first week. However, for the remaining three years and 51 weeks, those same sectors significantly underperformed, Adam explained.

“The market is known to have these knee-jerk reactions trying to anticipate where things go very quickly, but they don’t necessarily last,” Adam said.

What’s more, sectors that are expected to do well or poorly based on a president’s policies have sometimes gone the opposite way, according to Adam.

For example, the energy sector was down by 8.4% during Trump’s first administration, despite deregulation, record oil production and a rise in oil prices. Yet the energy sector climbed 22.9% under Biden as of Nov. 19, despite the administration’s push for renewables and sustainability.

For that reason, Raymond James ranks politics eighth for its potential impact on sectors. The seven factors that have more influence, according to the firm, are economic growth, fundamentals, monetary policy, interest rates and inflation, valuations, sentiment and corporate activity.

Here’s how Trump’s policy stances could influence eight sectors: autos, banks, building materials and construction, crypto, energy, health care, retail and technology.

Automobiles

Monty Rakusen | Digitalvision | Getty Images

The auto sector — like many others — will likely be a mixed bag, experts said.

Trump’s antipathy for electric vehicles is likely to create headwinds for EV producers.

His administration may try to roll back regulations like a Biden-era tailpipe-emissions rule expected to push broader adoption of EVs and hybrids. He also intends to kill consumer EV tax credits worth up to $7,500 — although states like California may try to enact their own EV rebates, blunting the impact.

Losing the federal credit would make EVs more costly, driving down sales and perhaps making “per unit economics even less favorable” for automakers, John Murphy, a research analyst at Bank of America Securities, wrote in a Nov. 21 research note.

Some companies seem well-positioned, though: Ford Motor (F), for example, “has a healthy pipeline of hybrid vehicles as well as traditional [internal combustion engine] vehicles to supplement the EV offerings,” Murphy wrote.

'Gradual electrification' is becoming more common in the auto industry, says fund manager

Tariffs and trade conflict pose threats to the auto industry, since the U.S. relies heavily on other nations to manufacture cars and parts, said Callie Cox, chief market strategist at Ritholtz Wealth Management.

They “could affect the cost and availability of cars we see in the U.S. market,” Cox said.

Economists expect tariffs and other Trump policies to be inflationary.

In that case, the U.S. Federal Reserve may have to keep interest rates higher for longer than anticipated. Higher borrowing costs may weigh on consumers’ desire or ability to buy cars, Cox said.

However, lower EV production could be a boon for companies that manufacture traditional gasoline cars, experts said.

Trump has also called for a “drill, baby, drill” approach to oil production. Greater supply could reduce gas prices, supporting demand for gas vehicles, experts said. But trade wars and sanctions on Iran and Venezuela could have the opposite impact, too.

—Greg Iacurci

Banks

In this 2017 file photo, President Donald Trump stands next to Jamie Dimon, chief executive officer of JPMorgan Chase & Co., left, in the State Dining Room of the White House in Washington.

Andrew Harrer | Bloomberg | Getty Images

Trump’s first administration eased certain regulations for banking rules, fintech firms and financial startups.

Likewise, Trump’s second term is expected to usher in lighter financial regulations.

That may help bolster profitability in the sector, and therefore stock prices, said Brian Spinelli, co-chief investment officer at Halbert Hargrove in Long Beach, Calif., which is No. 54 on the 2024 CNBC FA 100 list.

“The larger banks probably benefit more from that,” Spinelli said.

Less regulation — combined with the prospect that interest rates could stay higher — will provide a net positive for the bank industry, since they may be able to lend out more risk-based capital, said David Rea, president of Salem Investment Counselors in Winston-Salem, North Carolina, which is No. 8 on the 2024 CNBC FA 100 list.

One issue that emerged this year that could resurface is concern about regional banks’ exposures to commercial real estate, Spinelli said.

“It wasn’t that long ago, and I don’t think those problems disappeared,” Spinelli said. “So you question, is that still looming out there?”

—Lorie Konish

Building materials and construction

Bill Varie | The Image Bank | Getty Images

The housing market has been “frozen” in recent years by high mortgage rates, said Cox of Ritholtz.

Lower rates would likely be a “catalyst” for housing and associated companies, she said.

However, that may not materialize — quickly, at least — under Trump, she said. If policies like tariffs, tax cuts and mass deportations stoke inflation, the U.S. Federal Reserve may have to keep interest rates higher for longer than anticipated, which would likely prop up mortgage rates and weigh on housing and related sectors, she said.

The whims of the housing market impact retailers, too: Home goods stores may not fare well if people aren’t buying, renovating and decorating new homes, Cox said.

Home buyers are accepting higher mortgage rates, says Compass CEO Robert Reffkin

That said, deregulation could be “absolutely huge” for the sector if it accelerates building timelines and reduces costs for developers, Goldberg said.

Trump has called for opening new land to builders and creating tax incentives for homebuyers, without providing much detail.

Housing policies will be “one of the most-watched initiatives coming out of the next administration,” Cox said. “We haven’t gotten a lot of clarity on that front,” she said.

“If we see realistic and well-thought-out policies, you could see real estate stocks and related stocks” like real estate investment trusts, home improvement retailers and home builders respond well, Cox said.

—Greg Iacurci

Crypto

Republican presidential nominee and former U.S. President Donald Trump gestures at the Bitcoin 2024 event in Nashville, Tennessee, U.S., July 27, 2024.

Kevin Wurm | Reuters

Trump’s election has brought a new bullishness to cryptocurrencies, with bitcoin nearing a new $100,000 benchmark before its recent runup ended.

As president, Trump is expected to embrace crypto more than any of his predecessors.

Notably, he has already launched a crypto platform, World Liberty Financial, that will encourage the use of digital coins.

Those developments come as new ways of investing in crypto have emerged this year, with the January launch of spot bitcoin ETFs, and more recently, the addition of bitcoin ETF options.

Yet financial advisors are hesitant, with only about 2.6% recommending crypto to their clients, an April survey from Cerulli Associates found. Roughly 12.1% said they would be willing to use it or discuss it based on the client’s preference. Still, 58.9% of advisors said they do not expect to ever use cryptocurrency with clients.

“The number one reason why advisors aren’t investing in cryptocurrency on behalf of their clients is they don’t believe it’s suitable for client portfolios,” said Matt Apkarian, associate director in Cerulli’s product development practice.

Animal spirits, not fundamentals, are what's driving crypto markets: Portfolio manager

Even for advisors who do expect they may use crypto at some point, it’s “wait and see,” particularly regarding how the regulatory environment plays out, Apkarian said.

However, investors are showing interest in cryptocurrency, with 90% of advisors receiving questions on the subject, according to research from Christina Lynn, a certified financial planner and practice management consultant at Mariner Wealth Advisors.

For those investors, exchange-traded funds are a good starting place, since there’s less chance of falling victim to one of crypto’s pitfalls like scams or losing the keys, the unique alphanumeric codes attached to the investments, according to Lynn. Because crypto can be more volatile, it’s best not to invest any money you expect you’ll need to pay for near-term goals, she said.

Investors would also be wise to think of cryptocurrency like an alternative investment and limit the allocation to 1% to 5% of their overall portfolio, Lynn said.

“You don’t need to have a lot of this to have it go a long way,” Lynn said.

—Lorie Konish

Energy

U.S. President Donald Trump gestures after delivering a speech at a Double Eagle Energy Holdings LLC oil rig in Midland, Texas, on Wednesday, July 29, 2020.

Cooper Neill | Bloomberg | Getty Images

As of Nov. 19, energy has been the top-performing sector under President Joe Biden, with a 22.9% gain, even with the administration’s push for renewables and sustainability, according to Raymond James.

Yet it remains to be seen whether that performance can continue under Trump, who has advocated for more oil, gas and coal production. The outlook for the sector could change if Trump acts on a campaign threat to repeal the Inflation Reduction Act, a law enacted under Biden that includes clean energy incentives.

If Trump continues to make it easier to create more oil supply, that might not be a great thing for oil companies, according to Adam of Raymond James.

“Because there’s more supply, it may tamp down on the price of oil, and that’s one of the biggest drivers of that sector,” Adam said.

Eagle Global Advisors, a Houston-based investment management firm that specializes in energy infrastructure, is “cautiously optimistic” about Trump’s impact on the sector, according to portfolio manager Mike Cerasoli. Eagle Global Advisors is No. 35 on the 2024 CNBC FA 100 list.

“We would say we’re probably more on the optimistic side than the cautious side,” Cerasoli said. “But if we know anything about Trump it’s that he’s a wild card.”

Republican districts are biggest beneficiaries of the IRA, despite attempts to repeal

A lot of the Inflation Reduction Act may stay intact, since the top states that benefitted financially from the law also handed Trump a victory in the election, according to Cerasoli.

When Biden won in 2020, there was a lot of panic about the outlook for energy, oil and gas. In a third quarter letter that year, Cerasoli recalls writing, “I don’t think it’s going to be as bad as you think.”

Four years later, he has the same message for investors on the outlook for renewables. In the days following Trump’s January inauguration, Cerasoli expects there may be a deluge of executive orders.

“Once you get past that, you’ll get a sense of exactly how he’s going to treat energy,” Cerasoli said. “I think people will realize that it’s not the end of the world for renewables.”

—Lorie Konish

Health care

Medicine vials on a production line.

Comezora | Moment | Getty Images

Trump nominated Robert F. Kennedy Jr. as head of the Department of Health and Human Services.

RFK would be a “huge wild card” for the health care sector if the U.S. Senate were to confirm him, said Goldberg of Professional Advisory Services.

RFK is a prominent vaccine skeptic, which may bode ill for big vaccine makers like Merck (MRK), Pfizer (PFE) and Moderna (MRNA), said David Weinstein, a portfolio manager and senior vice president at Dana Investment Advisors, No. 4 on CNBC’s annual FA 100 ranking.

Cuts to Medicaid and the Affordable Care Act, also known as Obamacare, are also likely on the table to reduce government spending and raise money for a tax-cut package, experts said.

Publicly traded health companies like Centene (CNC), HCA Healthcare (HCA) and UnitedHealth (UNH) might be impacted by lower volumes of Medicaid patients or consumers who face higher healthcare premiums after losing ACA subsidies, for example, Weinstein said.

Robert F. Kennedy Jr. during the UFC 309 event at Madison Square Garden on Nov. 16, 2024 in New York.

Chris Unger | Ufc | Getty Images

Medical tech providers — especially those that supply electronics with semiconductors sourced from China — could be burdened by tariffs, he added.

Conversely, deregulation might help certain pharmaceutical companies like Thermo Fisher Scientific (TMO) and Charles River Laboratories (CRL), which may benefit from faster approvals from the Food and Drug Administration, Goldberg said.

Vivek Ramaswamy, a former biotech executive who Trump appointed as co-head of a new Department of Government Efficiency, has called for streamlined drug approvals. But RFK has advocated for more oversight.

“There’s a real dichotomy here,” Weinstein said.

“Where do we end up? Maybe where we are right now,” he added.

—Greg Iacurci

Retail

Thomas Barwick | Digitalvision | Getty Images

Analyst: Trump's tariffs could lead to a double-digit increase of apparel prices in the U.S.

Home Depot sources more than half its goods from the U.S. and North America, but “there certainly will be an impact,” CEO and president Ted Decker said Nov. 12 during the firm’s Q3 earnings call.

“Whatever happens in tariffs will be an industry-wide impact,” Decker said. “It won’t discriminate against different retailers and distributors who are importing goods.”

It’s a good idea for investors to own “high quality” retailers without a lot of debt and with diversified inventory sources, Goldberg said. He cited TJX Companies (TJX), which owns stores like TJ Maxx, Marshalls and HomeGoods, as an example.

“Direct imports are a small portion of [its] business and TJX sources from a variety of countries outside of China,” Lorraine Hutchinson, a Bank of America Securities research analyst, wrote in a Nov. 21 note.

Deregulation may be positive for smaller retailers and franchises, which tend to be more sensitive to labor laws and environmental and compliance costs, Goldberg said.

—Greg Iacurci

Technology

Former President Donald J. Trump speaks about filing a class-action lawsuits targeting Facebook, Google and Twitter and their CEOs, escalating his long-running battle with the companies following their suspensions of his accounts, during a press conference at the Trump National Golf Club on Wednesday, July 07, 2021 in Bedminster, NJ.

Jabin Botsford | The Washington Post | Getty Images

The technology sector continued its strong run in 2024, thanks in large part to the Magnificent Seven — Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla.

Even broadly diversified investors may find it difficult to escape those names, as they are among the top weighted companies in the S&P 500 index.

Information technology — which includes all those stocks except for Amazon and Google parent Alphabet — comprises the largest sector in the S&P 500 index, with more than 31%.

Trump is poised to have an influence on looming antitrust issues, amid considerations as to whether Google’s influence on online search should be limited.

Any tariffs put in place may also prompt some sales to decline or the cost of raw materials to go up, said Rea of Salem Investment Counselors.

Nevertheless, Rea said his firm continues to have a “pretty heavy” tech allocation, with strong expectations for generative artificial intelligence. However, the firm does not own Tesla, due to its expensive valuation, and has recently been selling software company Palantir, a winning stock that may have gotten ahead of itself, he said.

Technology valuations are trading well into the high double digits on a price to earnings basis, which often signals forward returns will decline, according to Halbert Hargrove’s Spinelli.

Consequently, prospective investors who come in now would basically be buying high, he said.

“If you think you’re going to get the same double digit returns in the next five years, sure it could happen on a one-year basis,” Spinelli said. “But your chances historically have been that your returns come down.”

—Lorie Konish

Continue Reading

Personal Finance

Many Americans are worried about running out of money in retirement

Published

on

M Swiet Productions | Getty Images

Many Americans are worried they’ll run out of money in retirement.

In fact, a new survey from Allianz Life finds that 64% Americans worry more about running out of money than they do about dying. Among the reasons cited for those fears include high inflation, Social Security benefits not providing enough support and high taxes.

The fear of running out of money was most prominent for Gen Xers who are approaching retirement. However, a majority of millennials and baby boomers also said they worry about their money lasting, according to the online survey of 1,000 individuals conducted between January and February.

Separately, a new Employee Benefit Research Institute report finds most retirees say they are living the lifestyle they envisioned and are able to spend money within reason. Yet more than half of those surveyed agreed at least somewhat that they spend less because of worries they will run out of money, according to the survey of more than 2,700 individuals conducted between January and February.

More from Personal Finance:
Nearing retirement? These strategies can protect from tariff volatility
Experts see higher stagflation risks. Here’s what it means for your money
Should investors dump U.S. stocks for international equities? What experts think

Meanwhile, a Northwestern Mutual survey reported that 51% of Americans think it’s “somewhat or very likely” they will outlive their savings. The survey polled 4,626 U.S. adults aged 18 and older in January.

Since those studies were conducted, new tariff policies have caused disturbance in the stock markets and prompted speculation that inflation may increase. Meanwhile, new leadership at the Social Security Administration has prompted fears about the continuity of benefits. Those headlines may negatively affect retirement confidence, experts say.

With employers now providing a 401(k) plan and other savings plans versus pensions, it is largely up to workers to manage how much they save heading into retirement and how much they spend once they reach that life stage. That responsibility can also lead to worries of running out of money in the future, experts say.

How to manage the ‘fear of outliving your resources’

Because of the unique risks every individual or couple faces when planning for retirement, the best approach is typically to transfer some of that burden to a third party, said David Blanchett, head of retirement research at PGIM DC Solutions.

Creating a guaranteed lifetime income stream that covers essential expenses can help reduce the financial impact of any events that require retirees to cut back on spending, Blanchett explained.

That should first start with delaying Social Security benefits, he said. While eligible retirees can claim benefits as early as 62, holding off up until age 70 can provide the biggest monthly benefits. Social Security is also unique in that it provides annual adjustments for inflation.

73% of Americans are financially stressed

Next, retirees may want to consider buying a lifetime income annuity that can help amplify the monthly income they can expect. Admittedly, those products can be complicated to understand. Therefore Blanchett recommends starting out by comparing very basic products like single premium immediate annuities that are easier to compare.

“Unless you do those things, you just can’t get rid of that fear of outliving your resources,” Blanchett said.

Without a guaranteed income stream, retirees bear all of the financial risk themselves, he said.

 “Retirement could last 10 years; it could last 40 years,” Blanchett said. “You just don’t know how long it’s going to be.”

Among retirees, there has been some hesitation to buy annuities, said Craig Copeland, EBRI’s director of wealth benefits research. Such a purchase requires parting with a lump sum of money in exchange for the promise of a guaranteed income stream.

“We see great increase in interest, but we aren’t seeing upticks in take up yet,” Copeland said. “I do think that’s going to start to change.”

What can help boost retirement confidence

To effectively plan for retirement, it helps to seek professional financial assistance, experts say.

Meanwhile, few people have a plan of their own for how they may live on the assets they’ve worked hard to accumulate, according to Kelly LaVigne, vice president of consumer insights at Allianz Life.

“This is something that you should not plan on doing on your own,” LaVigne said.

While the survey from Northwestern Mutual separately found individuals think they need $1.26 million to retire comfortably, the real number individuals need is based on their personal situation, said Kyle Menke, founder and wealth management advisor at Menke Financial, a Northwestern Mutual company.

In thinking about how life will look in 30 years, there are a variety of things to consider, Menke said. This includes stock market returns, taxes, inflation and medical expenses, he said.

Even people who have enough money for retirement often don’t feel confident in their ability to manage all of those factors on their own, he said. Financial advisors have the ability to run different simulations and stress test a plan, which can help give retirees and aspiring retirees the confidence they’re lacking.

“I think that’s where the biggest gap is,” said Menke, referring to the confidence Americans are lacking without a plan.

Continue Reading

Personal Finance

Trump tariffs will hurt lower income Americans more than the rich: study

Published

on

Shipping containers at the Port of Seattle on April 16, 2025.

David Ryder/Bloomberg via Getty Images

Tariffs levied by President Donald Trump during his second term would hurt the poorest U.S. households more than the richest over the short term, according to a new analysis.

Tariffs are a tax that importers pay on foreign goods. Economists expect consumers to shoulder at least some of that tax burden in the form of higher prices, depending on how businesses pass along the costs.

In 2026, taxes for the poorest 20% of households would rise about four times more than those in the top 1%, if the current tariff policies were to stay in place. Those were findings according to an analysis published Wednesday by the Institute on Taxation and Economic Policy.

Car prices are going up from Trump's auto tariffs 'unless something changes': Liberty Subaru owner

For the bottom 20% of households — who will have incomes of less than $29,000 in 2026 — the tariffs will impose a tax increase equal to 6.2% of their income that year, on average, according to ITEP’s analysis.

Meanwhile, those in the top 1%, with an income of more than $915,000 a year, would see their taxes rise 1.7% relative to their income, on average, ITEP found.

Economists analyze the financial impact of policy relative to household income because it illustrates how their disposable income — and quality of life — are impacted.

Taxes by ‘another name’

“Tariffs are just taxes on Americans by another name,” researchers at the Heritage Foundation, a conservative think tank, wrote in 2017, during Trump’s first term.

“[They] raise the price of food and clothing, which make up a larger share of a low-income household’s budget,” they wrote, adding: “In fact, cutting tariffs could be the biggest tax cut low-income families will ever see.”

Meanwhile, there’s already evidence that some retailers are raising costs.

A recent analysis by the Yale Budget Lab also found that Trump tariffs are a “regressive” policy, meaning they hurt those at the bottom more than the top.  

More from Personal Finance:
Consumers are spending as trade wars raise recession odds
Consumers make financial changes in response to tariffs
Can tariff revenue replace income tax?

The short-term tax burden of tariffs is about 2.5 times greater for those at the bottom, the Yale analysis found. It examined tariffs and retaliatory trade measures through April 15.

“Lower income consumers are going to get pinched more by tariffs,” said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers during the Biden administration.

Treasury Secretary Scott Bessent has said tariffs may lead to a “one-time price adjustment” for consumers. But he also coupled trade policy as part of a broader White House economic agenda that includes a forthcoming legislative package of tax cuts.

“We’re also working on the tax bill and for working Americans, I believe that the reduction in taxes is going to be substantially more,” Bessent said April 2.

It’s also unclear how current tariff policy might change. The White House has signaled trade deals with certain nations and exemptions for certain products may be in the offing.

Trump has imposed a 10% tariff on imports from most U.S. trading partners. Mexico and Canada face 25% levies on a tranche of goods, and many Chinese goods face import duties of 145%. Specific products also face tariffs, like a 25% duty on aluminum, steel and automobiles.

Continue Reading

Personal Finance

These payments can be garnished for a defaulted student loan

Published

on

Blackcat | E+ | Getty Images

What payments can be garnished?

The U.S. government has extraordinary collection powers on federal debts and it can seize borrowers’ federal tax refunds, wages and Social Security retirement and disability benefits, according to higher education expert Mark Kantrowitz.

The federal government can intercept other funds such as state income tax refunds and lottery winnings, Kantrowitz said.

In some cases, federal student loan borrowers can also be sued by the U.S. Department of Justice, and face a levy on the funds in their bank accounts, he said.

How much money can be taken?

Social Security recipients can typically see up to 15% of their monthly benefit reduced to pay back their defaulted student debt, but beneficiaries need to be left with at least $750 a month, experts said.

Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York, said she was especially concerned about the consequences of resumed collections on retirees.

“Losing a portion of their Social Security benefits to repay student loans could mean not having enough for food, transportation to medical appointments, or other basic necessities,” Rodriguez said.

NY Fed: 9 million student loan borrowers face significant drops in credit score

Meanwhile, your entire federal tax refund can be seized, including any refundable credits, Kantrowitz said. Fortunately, if you’ve already received your 2024 federal income tax refund, “the government cannot claw it back,” Kantrowitz said.

As for your wages, the federal government can garnish up to 15% of your disposable pay without a court order, Kantrowitz said. Wages of federal workers may be easier to seize, he added.

How can I avoid collection activity?

Take steps to get out of default and to try to avoid the start of any garnishments, experts said.

Borrowers in default will receive an e-mail over the next two weeks making them aware of the new policy, the Education Department said. You can contact the government’s Default Resolution Group and pursue a number of different avenues to get current on your loans, including enrolling in an income-driven repayment plan or signing up for loan rehabilitation

Some borrowers may also be eligible for deferments or a forbearance, which are different ways to pause your payments, Rodriguez said.

“We’re advising clients to request a retroactive forbearance to cover missed payments, and a temporary forbearance until they can get enrolled in an income-driven repayment plan,” she said.

If you do end up facing the garnishment of your Social Security benefits or wages, the government is required to provide you with notice before it starts its collection activity, Kantrowitz said. For your wages, a 30-day warning is required, while 65 days’ notice must be given before the seizure of Social Security benefits, he said.

You may have the option to have a hearing before an administrative law judge within 30 days of receiving a wage garnishment order, Kantrowitz said. Your wages may be protected if your employment has been spotty, or if you’ve filed for bankruptcy, he said.

“Borrowers can also challenge the wage garnishment if it will result in financial hardship,” Kantrowitz said.

You can dispute the offsets to your Social Security benefits, too, he said, by contacting the Education Department. The notice you receive should provide information on whom to contact.

Are you worried about the garnishment of payments such as wages or Social Security benefits? If you’re willing to share your experience for an upcoming story, please email me at [email protected].

Continue Reading

Trending