President-elect Donald Trump’s return to the White House next week is expected to boost certain sectors of the market, according to Alpine Macro. Small caps, industrials, fossil energy, and aerospace and defense stocks are predicted to perform well.
The firm’s chief geopolitical strategist, Dan Alamariu, recommends going long on oil stocks and small-cap industrials, while shorting crude oil prices, alternative energy, and specialty retailers. This strategy is driven by Trump’s pro-domestic manufacturing policies, deregulation, and increased defense spending.
Trump’s rhetoric on NATO and domestic manufacturing has lifted defense stocks in the past. However, the “Trump trade” weakened at the start of the year before rebounding. The Russell 2000 and aerospace and defense stocks are expected to continue their upward trend.
Alamariu warns that the new administration’s first 100 days could be marked with volatility due to geopolitical and domestic risks. Trump’s tariff plans also pose a potential headwind to markets. Despite this, oil companies, particularly US shale producers, are likely to benefit from gaining a bigger share of the global oil market.
Aerospace and defense stocks are well-positioned due to Trump’s push for increased military spending and purchasing US-made equipment. However, clarity on tariffs is still needed to avoid market disruption.
Source: https://www.cnbc.com/2025/01/18/trump-inauguration-trades-the-sectors-that-could-win-in-the-early-days.html