Sectors That Could Benefit in the Early Days Following Trump’s Inauguration

Specific market sectors are expected to be prominent winners after President-elect Donald Trump returns to the White House, according to Alpine Macro. These sectors include small companies, industrials, fossil fuels, and aerospace and defense stocks. Dan Alamaru, Chief Geopolitical Strategist at Alpine Macro, recommended investors focus on oil sector stocks and small industrial companies, while avoiding crude oil prices, alternative energy, and specialized retail traders.

Alpine Macro’s view comes as stocks related to the so-called “Trump trade” have regained their positions this week, including the Russell 2000 index and stocks from the defense and energy sectors. More broadly, stocks marked their best week since early November, moving into positive territory for the year after a weak start in January.

Trump’s Influence on Market Sectors
Trump’s election has been beneficial for sectors that support deregulation and policies favorable to domestic production. This is especially true for small companies and banks, which benefit from the market-friendly stance. His rhetoric about NATO spending and pushing allies to meet their defense budgets has also helped defense stocks. The Trump-related trade has been slow at the beginning of the year, but it has sharply recovered, with the Russell 2000 rising by 4% this week, along with the S&P Aerospace & Defense Select Industry ETF (XAR).

Economic Policies and Growth Outlook
According to Alamaru, U.S. stocks are likely to continue performing well in 2025, with Trump’s administration focusing on growth and prioritizing market-friendly, moderately conservative policies. However, Alamaru warned that the first 100 days of the new administration may be volatile, and the market remains vulnerable to a potential correction due to geopolitical and internal risks, as well as obstacles from Trump’s tariff plans.

Oil and Energy Sectors
Trump’s stance on energy independence and dominance in the U.S. is expected to benefit the oil sector, particularly American shale oil producers, who may seize a larger share of the global oil market. Alamaru emphasized that Trump’s early executive orders would highlight oil drilling and energy extraction, as well as the rollback of restrictions on natural gas exports and the EPA’s emissions rules for power plants.

Aerospace and Defense Stocks
Given Trump’s emphasis on defense spending and urging allies to increase their defense budgets, stocks in the aerospace and defense sectors are well-positioned. Companies providing airpower equipment and defense firms lagging behind their competitors are expected to benefit from increased demand for military hardware.

Concerns Over Tariffs
However, the potential for tariffs on global imports remains a concern. Alamaru noted that Trump’s approach to tariffs could destabilize the markets and the economy, and while the consensus on tariffs is shifting toward a more positive direction, the Trump administration may still be uncertain about how to proceed. The tariff policy remains a key factor to watch for potential market volatility.

In summary, sectors like oil, industrials, and aerospace and defense may stand to gain under Trump’s policies, while tariffs and related uncertainties could pose risks to the overall market.4o mini