S&P 500 Sectors: Are Financials and Energy Poised to Dominate During Trump’s Presidency?

Trump’s Second Term Begins: What Investors Should Know About Sector Impacts

Donald Trump’s inauguration on January 20, 2025, marks the beginning of his second presidential term, with policies expected to influence the U.S. stock market across key sectors. Investors should prepare for potential shifts in fiscal policy, regulatory changes, and trade strategies that could benefit or challenge specific industries. Here’s how his expected agenda might affect major sectors and notable stocks.

Will Consumer-Focused Sectors See a Boost?

Consumer discretionary and staples stocks could diverge under Trump’s administration. The promise of tax cuts and incentives to boost spending might support retail giants like Amazon and Home Depot, which thrive on discretionary income. However, inflationary pressures could dampen enthusiasm, especially for companies reliant on middle-class consumers.

Consumer staples firms such as Procter & Gamble and Coca-Cola may face challenges if Trump’s trade policies drive higher import costs for raw materials. Still, their defensive nature might attract investors in an uncertain economic climate.

Energy and Materials: A Resurgence?

Trump’s expected focus on domestic energy production could fuel gains for oil majors like ExxonMobil and Chevron, as well as natural gas companies. Support for fossil fuel development and fewer environmental regulations may also provide a tailwind for coal producers and pipeline operators.

In the materials sector, infrastructure spending plans could benefit industrial metals producers like Freeport-McMoRan and construction material firms such as Vulcan Materials. However, trade tensions or tariffs could complicate the outlook for companies dependent on global markets.

Financials and Real Estate: Tailwinds Ahead?

Banks and financial institutions, including JPMorgan Chase and Goldman Sachs, may see expanded margins under a looser regulatory framework and rising interest rates. Deregulatory moves could also encourage more lending activity, supporting broader economic growth.

For the real estate sector, a continuation of business-friendly tax policies might favor large REITs like Simon Property Group, particularly in retail and industrial real estate. However, higher interest rates could weigh on mortgage-oriented REITs.

Technology and Communication Services: Room for Growth?

Big Tech faces a mixed outlook. Giants like Apple, Microsoft, and Meta Platforms may benefit from corporate tax cuts but could encounter challenges if Trump intensifies scrutiny on monopolistic practices or data privacy issues.

Communication services companies like Alphabet (Google) and Disney may experience increased advertising revenue if consumer spending accelerates, although geopolitical issues could affect content production and global expansion.

AI-focused stocks like Nvidia and Broadcom may see continued demand as advancements in artificial intelligence and data center technologies remain priorities. However, potential trade tensions with China or regulatory scrutiny could pose headwinds for these semiconductor giants.

Healthcare, Industrials, and Utilities: What Lies Ahead?

Healthcare stocks such as UnitedHealth Group and Pfizer might gain from a reduced regulatory environment, though Trump’s push to lower drug prices could limit pharmaceutical profits.

In the industrials sector, defense contractors like Lockheed Martin and infrastructure firms such as Caterpillar may benefit from increased government spending. Meanwhile, utilities like Duke Energy might face pressure from rising rates but remain stable investments for yield-seeking investors.

Conclusion

Trump’s policies are likely to benefit cyclical sectors such as energy, financials, and industrials, while tech and healthcare could see opportunities tempered by regulatory uncertainty. With the Fed poised to maintain higher rates and potential geopolitical risks on the horizon, investors should focus on balancing growth-oriented sectors with defensive plays like staples and utilities to adapt to this new chapter.

Looking ahead, earnings results, inflation reports, and clarity on infrastructure spending will be critical in shaping market sentiment during Trump’s second term.

More Information in our Economic Calendar.