Trump’s Presidency Will Benefit Stocks in Almost Every Sector, says Goldman

Many are now hopeful that President-elect Donald Trump will finally make things interesting after years of slowing earnings growth and little in the way of excitement for many Wall Street analysts.

Goldman Sachs Group Inc. included a question this month on what the election of Donald Trump will mean for the industries covered by those surveyed when collating data for the Goldman Sachs Group Inc. Analyst Index — a proprietary measure of growth across different sectors of the S&P 500. They are rather optimistic, it turns out.

“This month, we asked analysts to comment on how the results of the U.S. election will affect companies in their respective sectors,” the team led by Avisha Thakkar writes in the new note.

“While their responses suggest that there is still uncertainty about the sector-level impact, the majority of sectors are anticipating favorable effects,” they say. the key reasons for the favorable outlook are expectations of lower tax rates and economic stimulus, the note added.

Goldman certainly isn’t the first to hail the potential benefits of a Trump presidency. many of Trump’s policies would be “pro-growth,” even while uncertainty about specifics remains high, wrote Dubravko Lakos-Bujas and Marko Kolanovic, quantitative analysts at JPMorgan Chase and Co.

the S&P 500 could see as much as $20 in additional earnings-per-share growth over the next few years if the campaign promises that have the potential to stimulate growth get implemented, they wrote this week .

Still, “it is difficult to overstate just how wide the range of possible policy outcomes is currently,” they said. “While majority of President-elect Trump’s policies are pro-growth for equities, parts of his more populist rhetoric could significantly disrupt the economy,” they add, pointing to the promise of stricter trade policies.

The strategists’ skepticism means they stop short of incorporating the effects into their base-case earnings forecasts when they say that all the former real-estate mogul’s campaign promises will go through.

However not all industries would have likewise benefits.

Goldman’s analysts expect some even to suffer under Trump and some to miss out. Some expected the election outcome to weigh negatively on their sectors, some respondents said.

Autos, aerospace, clean energy, and agribusiness were prime among those.

“Concerns regarding the outlook for business activity stem from potentially more restrictive trade policy, notably for clean energy and agricultural industries, and higher inflationary pressures,” according to Thakkar and team.

The firm’s Chief U.S. Equity Strategist David Kostin also sounded a note of caution even while many of the Goldman analysts surveyed are optimistic. Within months of the 45th president’s inauguration, the possibility that the “hope” that has enveloped markets since the surprise election result could fade, mooted his team in a separate report.

“Fear is likely to pervade during second half and the S&P 500 will end 2017 at 2,300,” according to Kostin et al. It would also mark a decline of nearly 5 percent from the 2,400 they expect the S&P 500 to be trading at during the first half of the year, while that would be 5 percent above where we are trading today.

(Adapted from Bloomberg)

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Categories: Economy & Finance

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