Active & Passive Policy & Regulation US Election Equities Blog

Beyond the Trump Trade: US Equity Investing in a New Policy Era

26 November 2024
6 min read
A view from below a hot air balloon with colors and patterns resembling the US flag that is being inflated.
John H. Fogarty, CFA| Co-Chief Investment Officer—US Growth Equities
Daniel C. Roarty, CFA| Chief Investment Officer—Sustainable Thematic Equities
Cem Inal| Chief Investment Officer—US Large Cap Value Equities

Policy changes could reshape return potential for companies across the US market. Here’s how investors can start thinking about the challenges ahead. 

US stocks are widely seen as big beneficiaries of President-elect Donald Trump’s policy agenda. But policy change takes time and will have complex effects on businesses, earnings and returns. So how can investors prepare to detect risks and uncover long-term opportunities amid the uncertainty?

Whatever your views on the election, the market consensus believes the new administration is good news for American businesses and stocks. Yet while Trump will be supported by a friendly Republican Congress, translating campaign promises into policy is always difficult—and will take time. 

Top-Down Change Requires Bottom-Up Research 

On the campaign trail, Trump pledged to pursue policies including subsidy suspensions, extended tax cuts, new tariffs and regulatory reform. This combination of policies is likely to increase the deficit, even if economic growth is strong, which could complicate its implementation.

Politically driven change from the top down is hard to predict. For example, Trump’s plans to boost investment in the US—by incentivizing reinvestment from US companies and foreign direct investment—won’t benefit companies and industries uniformly. And while it might sound counterintuitive, we think bottom-up research—focused on company exposures to change—is the best way for equity investors to identify risks and opportunities as policy becomes reality or falls short of expectations. Even at this early stage, we can begin framing four main policy areas that will inform fundamental analysis of sectors, industries and individual companies.

  1. Subsidies Won’t Suddenly Disappear


    Subsidies provided by the Inflation Reduction Act (IRA) of 2022—a key policy move of President Joe Biden—are likely to be targeted by Trump. IRA incentives for electric vehicles (EV) and renewable energy are considered particularly vulnerable, given the new government’s stated support of fossil fuel production and criticism of environmental initiatives. While the EV subsidies may indeed be at risk, we think repealing renewable energy subsidies will be much harder to do because many sustainable infrastructure projects have created jobs in Republican states.

    The IRA isn’t the only subsidy framework to watch. In fact, the Infrastructure Investment and Jobs Act (IIJA) of 2021 is three times larger than the IRA. The IIJA’s $1.2 trillion of stimulus supports a range of projects including transportation, water, energy and environmental initiatives—and only about a sixth has been released so far. Our research task as investors is to differentiate between subsidies at greater risk of being cut off and those more likely to survive.

    For example, investing in critical physical infrastructure is an area of bipartisan agreement that largely transcends the US election. Deglobalization (or multishoring) is leading to manufacturing and related infrastructure (power, water, transportation) investment to support industrial development. An administration focused on accelerating domestic economic activity, by definition, will also support accelerated infrastructure investment. We believe that broad support to invest in US infrastructure could create opportunities for select companies to benefit disproportionately.

    Similarly, the bipartisan CHIPS Act—aimed at strengthening the US semiconductor industry—is likely to remain mostly intact, in our view. Passed in 2022 with bipartisan support, the subsidies in this legislation are widely seen as vital to reduce US dependence on overseas technology that is considered vital to national security.

    Broadly speaking, companies whose earnings depend on at-risk subsidies must be reassessed critically. In other cases, we may find opportunities in companies with solid businesses that are incorrectly perceived as being susceptible to subsidy cuts. 

  2. Tax Cuts Don’t Make Better Businesses


    Trump has pledged to maintain the corporate tax rate at 21%, as per the Tax Cuts and Jobs Act of 2017. During the campaign, he also proposed potential further conditional tax cuts to 15%. Low corporate taxes may boost earnings across the board. But investors should be aware of the risks of assuming that an earnings lift from lower tax rates will support long-term profitability and equity outperformance.

    Lower-quality or commodity businesses (like banking) often pass on to customers the margin pickup from lower tax rates by reducing prices. In contrast, higher-quality businesses enjoy advantages that should be accentuated in a low-tax environment. Since these companies often have strong pricing power, they can retain a tax windfall for reinvestment rather than pass it on to customers, which reinforces earnings growth potential and return power. Investors shouldn’t be seduced by a tax-induced earnings jump, but rather maintain focus on business features that support long-term return potential.

  3. Tariffs: What Have Companies Learned?


    During the campaign, Trump promised to make tariffs a central component of his trade policy. On November 25, the president-elect said that after taking office, he will issue an executive order imposing a 25% tariff on all imports from Canada and Mexico, as well as an additional 10% tariff on China. If implemented, new tariffs could incentivize American companies with overseas operations to bring production back to the US. But the impact will not always be straightforward—US manufacturers that rely on parts produced overseas could face new cost challenges if immediate domestic solutions aren’t available. These dynamics present big research questions.

    Even before details are known, investors and analysts can evaluate a company’s geographic and product exposure to tariffs, to inform an appropriate response. That doesn’t only mean selling down positions at risk; in some cases, we might take advantage of temporary dislocations triggered by the headlines in companies that look likely to benefit from changing price dynamics. We can also study how individual companies managed tariff risk during Trump’s first presidency and whether their supply chain resiliency has grown since COVID. Some companies are better prepared for the changes to come, which should be reflected in their risk/reward equation.

    Trade wars and tariffs widen the range of potential outcomes for companies and investors. If the risks are too severe, investors should step out of the way and avoid an industry or a company that’s in the direct line of fire of unpredictable trade moves.

    If a company is vulnerable to tariffs but has an otherwise solid business, we can apply suitable discount rates that reflect a risk-aware valuation. Then, we can gauge whether the long-term reward potential compensates for those risks. Position sizes in a portfolio can also be adjusted to reflect a company’s susceptibility to tariff moves.

  4. Regulation Can Be a Game Changer


    Regulation—and deregulation—require attention in many sectors. But the outcome of regulatory change isn’t always one-dimensional. For example, if regulations on fossil fuel exploration and production are eased, that doesn’t mean renewable energy companies are doomed. In our view, renewable energy initiatives are driven primarily by improving economics rather than regulation, so companies in these industries must be analyzed on a case-by-case basis. In some cases, shares of resilient renewable energy companies may be punished over fears of unfavorable regulation, creating buying opportunities.

    Looser regulatory scrutiny could remove an overhang for some mega-cap technology stocks as well as the largest US banks, and may fuel a pickup in M&A activity.

    Investors must keep an eye on appointees to key positions in the Department of Justice, the Federal Trade Commission and health agencies, to start understanding how regulatory change might unfold. Robert F. Kennedy’s nomination for Secretary of Health and Human Services has raised questions about the healthcare sector, given his outspoken positions on issues such as vaccines and big pharma companies. His appointment may not be confirmed by the Senate. However, if he is appointed, investors must reassess the impact to diverse companies across the healthcare sector—from medical technology to drugmakers. As a rule of thumb, if radical regulatory change is coming, it's imperative to focus on healthcare companies with explicit business advantages that should persist, come what may.

    Deregulation is a powerful force that can be a game changer for companies in diverse industries. Deciphering the potential impact of deregulation on businesses requires industry expertise and favors active management, which allows investors to position appropriately in potential winners and reduce exposure to likely losers.


Change is undoubtedly coming to US companies and stocks. In an era of dramatic upheaval, we think sticking to disciplined investing processes backed by real-time fundamental research is essential. Whether you are a growth, value or thematic equity investor, following clear principles to identify companies with strong fundamentals is the best antidote to uncertainty, in our view. With an active approach to stockpicking, portfolio construction and risk management, we believe investors can adjust to the rapidly changing environment and ensure that an allocation is positioned appropriately to capture evolving opportunities in a new US political environment.

The views expressed herein do not constitute research, investment advice or trade recommendations, and do not necessarily represent the views of all AB portfolio-management teams and are subject to change over time.

About the Authors

John started his career as a quantitative analyst at AB in 1988 and returned to the firm in 2006. Both times he was drawn to AB’s culture of intellectual curiosity and drive to win for its clients.

John’s investment philosophy centers on process. A striving to better understand and coalesce around research insights means that managers can stick to their guns when faced with headwinds rather than react to a point in the economic cycle.

Active management allows for this approach “Going with the flow has never worked as far as differentiating yourself,” John says. “At every level, AB’s culture supports us staying true to our convictions.”

Daniel C. Roarty can boast that at a phase in life when coolness matters, his daughters think his job on Wall Street is cool. The reason? His investment strategy revolves around identifying the biggest issues facing the world and constructing thematic investment portfolios around them.

World hunger, climate change, access to healthcare—these themes play primary roles in the strategies Roarty crafts every day. His work gives him the opportunity to do good by merging his professional life with pressing issues.

Roarty feels lucky to be at a firm like AB that has given him the freedom to take a holistic, global approach to investing and build out his own team and strategy since he joined in 2011.

Cem Inal was appointed Chief Investment Officer of US Large Cap Value Equities in 2020, after serving as portfolio manager of US Large Cap Value Equities from 2016 until 2019. He has also served as Portfolio Manager of Global Real Estate Securities since 2023. Inal was previously a senior research analyst and leader of the technology sector. He also co-managed the International Small Cap Value service from its inception in 2014 until 2016. Before joining the firm in 2003 as a research analyst, Inal was a vice president at fusionOne, a communications software provider. Prior to that, he was an engagement manager at McKinsey & Company and a research engineer at Mitsubishi Electric. Inal holds a BSE in electrical engineering from Princeton University and an MBA in financial engineering from Cornell University. Location: New York