Impact of Trump on Stock Market: US Equity Outlook & Sector Analysis

Published on March 27, 2025 by Mayank Chauhan

Donald Trump’s first term as president (2017-21) impacted US equity market in different ways in the different sectors, influenced by his administration's policies on tax cuts, deregulation, trade, infrastructure spending and immigration all of which influenced the US equity market outlook. During his 2024 election campaign, he sounded consistent with these policies, with the “America First” and “Make America Great Again” slogans in pursuit of a strong US economy. He pledged to cut the corporate tax rate (to as low as 15% from 21%); promised sweeping changes to the country’s regulatory bodies, aiming to reduce regulatory oversight to ensure a more attractive economic environment; guaranteed doubling down on trade tariffs, especially against China (he pledged to impose a 10% tariff on all imports and a 60% tariff on goods from China); and committed to the mass deportation of illegal immigrants.

At the start of Trump’s second term as president, we explore the “likely future impact” of a similar policy environment of comprehensive US stock market analysis, combined with the promises made during the election campaign, on key economic sectors of US equity markets as they report record-high post-election results anticipating lower taxes; deregulation, it becomes increasingly important to assess the impact of Trump on stock market behavior, especially in light of challenges such as inflation from tariff hikes, (leading to higher interest rates); and a higher deficit (i.e. high government debt). These evolving US stock market trends form the basis for the sector-wise breakdown that follows, outlining how policy directions could shape equity performance.

1. Financials

Previous policy stance:

The Trump administration implemented a number of policies that affected the US financial services sector, with a mix of deregulation, tax reforms and trade policies that had both short- and long-term impacts. The following are some of the changes:

• Rolled back provisions of the 2010 Dodd-Frank Act: The administration eased some of the restrictions imposed by the Act, which was enforced after the 2008 financial crisis to reduce risks in the financial sector.

• Tax Cuts and Jobs Act of 2017: President Trump signed a sweeping tax-reform package that cut the corporate tax rate from 35% to 21% and provided several incentives for US-based firms.

• China tariffs and trade war: The administration imposed tariffs on imports from China and engaged in trade disputes with several other nations. Although financial services were not directly affected, these policies created uncertainty in global markets.

• Although the Federal Reserve (Fed) operates independently, President Trump commented frequently on Fed policies, often proposing lower interest rates to stimulate growth.

• Reduced the Consumer Financial Protection Bureau’s (CFPB’s) authority: The administration aimed to reduce the scope and reach of the CFPB, with a focus on cutting back regulatory oversight.

Likely future impact on US equity market outlook:

• Renewed deregulation policies are expected to impact the financial sector positively by reducing compliance costs and regulatory burdens and potentially increasing profitability; however, they also raise concern about heightened risks in the financial system.

• The lower corporate tax rate would improve profitability for financial institutions and is favourable for the stock market.

• Trade tensions and tariff uncertainty may cause periodic market volatility, impacting investment portfolios and returns for financial institutions.

• Although the Fed may not be influenced directly to alter its policy decisions, all this may have added a layer of political tension. In a low-interest-rate environment (due to decisions influenced by other economic factors, not just President Trump’s comments), borrowers would benefit, but it could also pose challenges for banks’ net interest margins, impacting profitability.

• The CFPB’s reduced authority would lead to fewer restrictions on certain lending practices, which some argue would benefit financial institutions.

In the long term, President Trump’s policies for the financial services sector are likely to have a mixed impact. Actions relating to deregulation are expected to boost financial firms' short-term profitability but are likely to spark debate about potential systemic risks.

2. Energy

Previous policy stance:

The Trump administration prioritised energy independence primarily by promoting fossil fuels and reducing environmental regulations; this benefited oil, gas and coal companies. A number of Obama-era climate regulations were rolled back, aiming to reduce costs for energy producers. The following are some of the changes:

• Reduced regulations that limited production of fossil fuels. This included rolling back the Clean Power Plan and easing restrictions on drilling, particularly in federal lands and offshore areas. Projects such as the Keystone XL and Dakota Access pipelines received support, boosting transport of oil and reducing costs for energy companies.

• Rolled back dozens of environmental regulations such as (1) the methane emission rules – rules restricting methane leaks from oil and gas operations were loosened significantly, reducing compliance costs but raising environmental concerns; (2) the Endangered Species Act – introduced changes that facilitated energy development in areas that were previously restricted; and (3) fuel efficiency standards – attempted to weaken these standards for vehicles, with a direct impact on gasoline consumption.

• Limited support for renewables: Although not outright hostile to renewable energy, President Trump’s policies did not prioritise wind, solar or other renewables. Tax credits for renewables were left to expire or reduced, with the administration arguing that renewables should compete on a level playing field without subsidies.

• Support for coal: President Trump promised to "bring back coal" by reversing regulations on coal-fired power plants and scrapping the Clean Power Plan that targeted reducing carbon emissions.

Likely future impact on US equity market outlook:

• Lower energy costs: A similar policy would lead to lower costs of energy produced domestically, particularly fossil fuels.

• Environmental concerns: Rolling back environmental protections would raise concerns about increased emissions and long-term environmental damage.

• Market uncertainties: Deregulation would be welcomed, but a lack of long-term climate and energy-transition policies would create uncertainties, as the global market increasingly favours clean energy.

Taking a similar approach would boost traditional energy companies, particularly oil and gas, at the expense of environmental and climate considerations, raising concern about the sustainability of the sector. Renewables may face slower growth if subsidies and support shift back to fossil fuels, although broader market trends in clean energy could temper this.

3. Industrials

Previous policy stance:

The industrial sector benefited from tax reforms, deregulation, trade policy and infrastructure spending initiatives aimed at boosting domestic manufacturing. The following is a closer look at how policies influenced the sector:

• Tax reforms included (1) lowering the corporate tax rate from 35% to 21%; this benefited industrial companies by reducing their tax burden and increasing capital available for investment and expansion; and (2) accelerating depreciation; this enabled businesses to write off the full cost of capital expenditure immediately, encouraging manufacturing companies to invest in equipment, facilities and technology.

• Deregulation: (1) Several environmental regulations, including parts of the Clean Power Plan and restrictions on greenhouse gas emissions, were rolled back. This reduced compliance costs for sectors such as oil, gas, coal and heavy manufacturing but raised environmental concerns. (2) The administration worked to reduce labour-related regulations, particularly in the energy and manufacturing sectors, by cutting OSHA requirements and streamlining the permitting process.

• Trade policy and tariffs: (1) In 2018, President Trump imposed tariffs on imported steel (25%) and aluminium (10%) to protect US industries from international competition, primarily targeting imports from China. In the short term, this boosted domestic production but increased input costs for sectors dependent on these materials, such as automotive and construction. (2) The administration’s trade war with China led to tariffs on Chinese goods for a number of sectors. Although intended to support US manufacturing, this created uncertainty and raised costs for US companies that relied on imported components and materials.

• The Buy American, Hire American initiative encouraged use of US-made goods in federal contracts and promoted hiring American workers. It spurred demand for domestic manufacturing but faced challenges in sectors that faced labour shortages or lacked domestic suppliers.

• Infrastructure and energy policies: (1) As discussed above, the Trump administration emphasised energy independence, promoting fossil fuel production (oil, gas, coal) and rolling back support for renewable energy sources. This boosted the fossil fuel sector but had a mixed impact on jobs in the renewable energy sector. (2) Although a significant federal infrastructure plan did not materialise, the administration proposed extensive infrastructure projects to support the transport, energy and manufacturing sectors.

Likely future impact on US equity market outlook:

A similar policy stance could have a mixed impact, with some sectors benefiting while others face increased challenges. The policies would benefit sectors such as fossil fuels, traditional manufacturing and heavy industry due to reduced regulatory and tax burdens but pose challenges for sectors dependent on international supply chains or exports, making them face higher input costs and market volatility due to tariffs and trade disputes.

4. Technology

Previous policy stance:

The Trump administration introduced a number of policies that affected the US tech sector. Key policy areas included immigration, regulation, trade and data security. We provide details on how these policies shaped the tech sector below:

• US-China trade war: Imposed tariffs on Chinese goods, including tech components, to address trade imbalances and protect intellectual property. These tariffs increased costs for tech companies that relied on Chinese manufacturing/materials, requiring them to rethink supply chains and face potential price increases.

• Export restrictions: The administration restricted US companies from selling technology to specific Chinese firms, citing national security concerns. This affected the global operations of US-based companies.

• H-1B visa restrictions: Tighter restrictions on H-1B visas (used heavily by tech companies for skilled foreign labour) created hiring challenges for tech companies. Furthermore, the Buy American, Hire American executive order aimed to prioritise American workers and discouraged reliance on foreign talent.

• Regulatory stance on tech companies: The Trump administration increased antitrust scrutiny of large tech companies such as Google, Apple, Facebook and Amazon, aiming to address concerns over monopolistic practices, data privacy and free competition, although critics argued they may limit innovation and hinder these companies’ market expansion.

Likely future impact on US equity market outlook:

Similar policies could present a mix of challenges and opportunities for the US tech sector, spurring shifts in sourcing, hiring and market strategy. The effects of previous policies continue to influence US tech companies as they adapt to new regulatory environments and an evolving global tech landscape.

5. Healthcare and pharmaceuticals

Previous policy stance:

Healthcare policies pursued by the Trump administration focused on reshaping the Affordable Care Act (ACA), reforming drug pricing and adjusting regulations around insurance and Medicaid. In addition, corporate tax cuts boosted profitability across the healthcare sector. The following is an overview of some key policies:

• Attempts to repeal the Affordable Care Act (ACA): In 2017, Congress came close to repealing the ACA but ultimately succeeded only in removing the individual mandate (a penalty for not having health insurance). Removing the mandate increased the number of uninsured Americans, as some healthy individuals opted out of coverage. However, some lower-income individuals benefited due to not facing a penalty.

• Medicaid waivers and work requirements: The administration granted Medicaid waivers for states to impose work requirements on Medicaid recipients, meaning able-bodied adults without dependants needed to prove employment or efforts to look for a job to maintain eligibility for Medicaid. This led to reduced registrations for Medicaid.

• Efforts to reduce prescription drug prices: The administration attempted to address high drug prices via a number of initiatives, including by aligning Medicare drug prices with those in other developed countries, promoting drug imports and increasing transparency in drug pricing. Although some rules governing transparency and minor price reductions came into effect, major reforms were not fully realised.

Likely future impact on US equity market outlook:

The Trump administration is expected to focus on policies aimed at reducing prescription drug prices, which could add regulatory pressures on pharmaceutical companies. Hospital and managed-care companies could be impacted by shifts in healthcare funding or changes to the ACA.

A weakening of the ACA would lead to an increase in the number of persons uninsured, particularly low-income and rural populations, after years of decline. The emphasis on deregulation allowed more flexibility for private insurers but created a more fragmented coverage landscape, with inconsistencies in access to healthcare, highlighting the deep divisions in approaches to US healthcare reform.

Broadly speaking, lower corporate taxes, along with deregulation during President Trump’s previous term, supported the consumer discretionary, consumer staples and real estate sectors. However, tariffs and trade wars have raised costs for many companies reliant on imports, impacting profit margins. The overall impact on these sectors was, therefore, mixed.

In conclusion, we believe President Trump’s previous term was marked by policies that favoured traditional sectors such as financials, energy and industrials, with a mixed impact on the tech and consumer sectors due to trade tensions and tariffs. His second term could lead to sector-specific impacts, largely consistent with those during his first. The environment is likely to be pro-business, with tax cuts and deregulation continuing to benefit traditional sectors such as energy, financials and industrials, while sectors related to renewable energy, healthcare reform and international trade may experience volatility. However, markets are complex to assess given the nuances and their being affected by political/administrative policies, the Fed’s monetary policy stance and the ever-evolving geopolitical landscape. A thorough US stock market analysis remains critical to identifying potential beneficiaries and sectors at risk amid evolving conditions, While certain sectors could benefit, others may face headwinds due to policy uncertainty, especially in tech and consumer discretionary segments reliant on global trade.

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Sources:

• https://www.russell-clark.com/p/the-next-stage-in-western-civilisation

• https://www.deccanherald.com/business/markets/wall-street-hits-record-high-as-donald-trump-returns

• Sectors to Watch Out in Donald Trump's Presidency 2024

• US Election Results: Goldman Sachs, other bank shares surge up to 13% on deregulation hopes – CNBC TV18

• Navigating The Trump 2.0 Market – Simply Wall St

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