3 economic sectors affected by Trump’s second term
The report said: The affected sectors are: energy and finance.
Energy sector
He added that in the energy sector, Trump’s “drilling aggressively” policy aims to expand domestic oil and gas production, but American oil producers may face mixed prospects as a ceiling on oil prices may be put in place, harming profitability.
The report noted that renewable energy producers may face political pressure, although global demand and cheaper financing may help..
health care
The report explained that aging formula and medical innovation are strong enablers, but regulatory risks, especially around drug pricing, pose challenges.
He said: The potential appointment of Robert F. Kennedy Jr. may add further uncertainty. Despite short-term volatility, attractive entry points for long-term investors may arise due to solid fundamentals and low valuations.”
Financial sector
The report explained that deregulation may enhance bank profits by relaxing capital and lending rules.
“However, performance will depend on economic growth and interest rate trends, as a slowdown in the economy may weaken loan demand and put pressure on margins,” he added..
Risks and opportunities
According to the report, the return of the Trump administration carries a mix of political risks and tactical opportunities. Markets are likely to face a great deal of uncertainty as the administration focuses on three factors: tariffs and supply chains, deregulation, and immigration reform.
Customs duties and supply chains
The report expected that new customs duties on imports, especially from China, would disrupt supply chains, increasing costs for companies that depend on foreign production.
He reported that sectors with high beta such as technology and small companies may see an increase in volatility.
Deregulation
According to the report, industries such as energy, financial services, and manufacturing may benefit from lower compliance costs, leading to increased efficiency and profitability..
Immigration reform
According to the report, stricter policies may strain industries such as technology, healthcare and construction, which depend on foreign workers. Labor shortages may push up wages, fueling inflation.
The Big Seven
The report said: Over the past two years, US stock gains were dominated by what is known as the “Big Seven” – Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta, and Tesla – which now constitute nearly 30% of the market value of the Standard & Poor’s index.500 .
This led to investment portfolios being largely concentrated on these names and American stocks in general, which limited diversification.
“But a shift may be underway,” the report said. “Earnings growth is no longer concentrated solely in the technology and consumer discretionary goods sectors to which most of the “Big Seven” stocks belong.”
For the first time since 2018, all sectors of the index are expected to achieve S&P 500 Positive profit growth in 2025.
Technology is a key driver
While technology will remain a primary driver of market returns, there is growing potential in sectors such as healthcare, industrials, materials and energy. These sectors are likely to benefit from a combination of infrastructure spending, supply chain relocation and innovation.
The healthcare sector looks particularly promising given its strong earnings outlook, attractive valuations, and enabling structural factors such as aging demographics and advances in medical technology.
The industrial and materials sectors are expected to benefit from continued investment in artificial intelligence-based industrial processes and infrastructure projects.
The report expects that energy companies, including those linked to artificial intelligence power generation, will see renewed interest from investors.
However, the importance of technology will not fade, according to the report. The next phase of technology leadership is likely to focus on companies that demonstrate real adoption of AI in the real world.
The future performance of the sector will depend on its ability to move from evaluations based on media hype to achieving measurable results through competencies based on artificial intelligence..
Opportunities beyond American shores
The report added that with investment portfolios concentrated in US stocks, especially in the “Big Seven,” investors may benefit from looking outside the United States if they are looking for diversification or new avenues for strong growth.
European and Asian markets, while facing their own set of challenges, offer compelling value opportunities compared to the United States.
He noted that European stocks are trading at a significant discount compared to the United States, which reflects concerns about the weakness of the euro zone economy, the risks of customs duties, and ongoing geopolitical and political tensions.
The Seven Wonders
According to the report, the region’s “seven wonders”, which include Hermes, Novo Nordisk, Siemens, LVMH, SAP, ASML and Schneider Electric, outperformed the broader market, although not as dramatically as their US counterparts.
He reported that each sector in Europe traded at a higher discount to the historical average compared to the United States. Looking to the future, the index’s profits are expected to rise MSCI Europe by 1.3% in 2024 and accelerating to 6.6% in 2025, led by information technology, consumer discretionary goods and healthcare.
Key growth areas also include electrification, renewable energy and industrial innovation, with European companies being world leaders.
Sharp rebounds
Meanwhile, in Asia, China offers the potential for sharp rebounds, as Chinese stocks are attractively priced, and any signs of demand-driven fiscal easing or deals with Trump on tariffs could spark a rapid rally.
“However, this remains a tactical rather than a structural opportunity,” he added. “Persistent issues such as deflation, high debt and weak consumer confidence continue to impact the long-term outlook.”
He continued: “In addition, the large role of government intervention in the economy and markets creates uncertainty, making Chinese stocks less attractive from a structural investment perspective unless meaningful reforms are implemented.”.
Selective opportunity
Japan, on the other hand, offers a more selective opportunity. Following the Bank of Japan’s policy shift (BOJ) In July, Japanese stocks saw a brief correction before recovering again.
Valuations have become less attractive, and the broader market faces risks of deteriorating global demand and a stronger yen. However, sectors such as banks, which benefit from rising interest rates, and industrial companies linked to government industrial policy may provide targeted opportunities.
According to the report issued by Saxo Bank, corporate governance reform remains a long-term catalyst for Japanese stocks, especially for companies that improve shareholder returns..
“Investors looking for exposure to emerging markets may find value in countries like Vietnam, which are likely to benefit from a reorganization of global supply chains as companies look to diversify away from China amid trade war risks,” the report said..
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