How the White House is shaking up stock market values

Donald Trump’s return to the White House captured widespread attention last week, bringing a boost to the U.S. stock market, which has risen 2% since last Monday, further propelling the ongoing market boom. While the market is considered overvalued by most analysts, its valuations are supported by the fact that the United States leads the world in productivity and remains the global technological powerhouse, home to the major companies driving artificial intelligence development, according to Leonardo Fernández, General Manager for Iberia at Schroders. Additionally, the U.S. economy has demonstrated stronger-than-expected growth, and the dollar remains robust. “If Trump implements his promised fiscal policies, it will provide even more fuel for the fire,” says Fernández.

The outlook for the U.S. stock market is generally positive. However, as always, certain stocks will benefit more than others from the political shift. Among the winners, Fernández highlights small and mid-cap companies — those that generate 75% of their profits domestically. These companies will likely benefit from Trump’s “Make America Great Again” agenda. Trading at historic discounts, they are among the few U.S. firms that aren’t overpriced, instead trading in line with their global counterparts, he adds.

The so-called Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla) are among the biggest beneficiaries of the White House shift. “However, the 600% growth they’ve experienced is unsustainable, and 60% of the S&P 500′s revaluation is largely driven by them,” says Fernández, who however, points out that their competitive advantage may not yet be fully priced in.

The same applies to financial institutions, according to Filipe Aires, an analyst at Afi, as well as to oil and gas companies following the U.S. withdrawal from the Paris Agreement. “We see potential in traditional energy, which has performed very well in 2024,” Fernández adds.

“In the last two months, many of the market movements have already taken place, with sectors such as oil, finance, and technology benefiting from the deregulation announced by Trump,” explains Javier Galán, investment director at Renta 4. While announcements like the $500 billion AI investment by Microsoft, Oracle, and SoftBank continue to drive growth, semiconductor firms and software developers are also seeing similar momentum.

Galán points to stocks that have particularly benefited from these shifts, such as banks like JPMorgan, Bank of America, and Citi, as well as energy companies like Exxon and Chevron. Defense firms such as Lockheed Martin and health sector giants like Pfizer and Johnson & Johnson stand to gain from the Trump era as well, says Fernández.

Among those likely to be affected, both analysts from Schroders and Renta 4 point to companies with a high level of labor intensity, which will be impacted by the wave of immigrant deportations announced by Trump. These companies will face greater difficulty in recruiting staff and will likely need to raise wages, they predict. According to Galán, this will mostly affect industrial companies, particularly in the hospitality and retail sectors,

Companies like Apple, which rely on cheaper production in China, will also feel the impact of Trump’s tariff policies, along with fashion brands such as Polo and Nike, as well as car manufacturers like Ford, General Motors, and Chevrolet, Galán continues.

However, renewable energy companies top the list of those most negatively affected by the political shift, according to Filipe Aires. Yet, as with many cases, this analyst notes a double effect, pointing to the increasing electricity needs of artificial intelligence as a potential advantage. Galán suggests that Tesla could also be impacted by the withdrawal of subsidies for electric vehicles. But, he asks, would the president harm Elon Musk, his key supporter? Real estate companies might be affected by a slower-than-expected decline in interest rates, and consumer staples companies could face challenges from tariffs.

Ultimately, despite high company valuations, there appears to be little alternative to the U.S. market, says Sébastien Senegas, Head of Iberia and LATAM at Edmond de Rothschild AM. “The gap between the U.S. and Europe is at record levels. The U.S. stock market is performing much better than European markets and could continue to do so in 2025,” he adds.

With GDP growth exceeding expectations due to Trump’s measures, company profits are expected to rise, and with them, the stock market, Senegas explains. However, investors may begin to view U.S. stocks as too expensive and look to European markets instead.

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition