What impact may President-elect Donald Trump have on investors in these 8 market sectors?

• Market experts said that the policy agenda of President-elect Donald Trump, including tariffs and deregulation, presents risks and rewards for various investment sectors.
• The big factors that affect autos, banks, building materials and construction, crypto, energy, health care, retail, and technology are significant.

As the inauguration approaches, investors are attempting to predict whether the economy will prosper or decline under President-elect Trump.

Market experts predict that Trump's campaign promises, including tariffs, mass deportations, tax cuts, and deregulation, will have both risks and rewards for various investment sectors.

Experts said that if Republicans maintain control of both chambers of Congress, Trump may have more freedom to fulfill his promises, but the specifics of how and when they will be implemented are still unclear.

Uncertainty is rampant at the moment, according to Jeremy Goldberg, a financial planner, portfolio manager, and research analyst at Professional Advisory Services, which placed 37th on CNBC's annual Financial Advisor 100 list.

Goldberg stated that he wouldn't be placing large bets on either side.

Sectors often fare differently than expected

According to Larry Adam, chief investment officer at Raymond James, predicting the sectors that may win or lose under a new president is challenging due to past market results.

In the first week after Trump's election in 2016, financials, industrials, and energy sectors outperformed the S&P 500. However, for the next three years and 51 weeks, those same sectors underperformed significantly, as explained by Adam.

Adam stated that the market is known for its quick reactions, trying to anticipate where things will go, but these reactions may not always last.

According to Adam, sectors that are predicted to perform well or poorly under a president's policies have sometimes reversed their expectations.

Despite deregulation, record oil production, and a rise in oil prices, the energy sector was down by 8.4% during Trump's first administration. However, the energy sector climbed 22.9% under Biden as of Nov. 19, despite the administration's push for renewables and sustainability.

According to Raymond James, economic growth, fundamentals, monetary policy, interest rates and inflation, valuations, sentiment and corporate activity rank higher than politics in terms of potential impact on sectors.

Eight sectors, including autos, banks, building materials and construction, crypto, energy, health care, retail, and technology, could be impacted by Trump's policy stances.

Automobiles

Experts predict that the auto sector will likely have both positive and negative aspects.

The dislike of electric vehicles by Trump may pose obstacles for EV manufacturers.

Biden-era tailpipe-emissions rule may be rolled back by his administration, which also plans to eliminate consumer EV tax credits worth up to $7,500. However, states like California may counteract this by enacting their own EV rebates.

The loss of federal credit for EVs could increase their cost, decrease sales, and negatively impact automakers' "per unit economics," according to John Murphy, a research analyst at Bank of America Securities, in a Nov. 21 research note.

Ford Motor has a healthy pipeline of hybrid vehicles and traditional internal combustion engine vehicles to supplement its EV offerings, according to Murphy.

The auto industry faces threats from tariffs and trade conflict as the U.S. heavily relies on other nations for car manufacturing and parts, according to Callie Cox, chief market strategist at Ritholtz Wealth Management.

Cox stated that the "availability and cost of cars in the U.S. market could be impacted by them."

Economists expect tariffs and other Trump policies to be inflationary.

If the U.S. Federal Reserve maintains higher interest rates for a longer period than expected, consumers may be deterred or unable to purchase cars due to increased borrowing costs, according to Cox.

Experts said that lower EV production could benefit companies that produce traditional gasoline cars.

Experts noted that while Trump has advocated for increased oil production through a "drill, baby, drill" approach, this could potentially lead to lower gas prices and higher demand for gas vehicles. However, trade conflicts and sanctions on Iran and Venezuela could counteract these effects.

—Greg Iacurci

Banks

The Trump administration relaxed certain banking regulations for fintech companies and financial startups.

Trump's second term is predicted to bring about more relaxed financial regulations.

According to Brian Spinelli, co-chief investment officer at Halbert Hargrove in Long Beach, Calif., which ranks 54th on the 2024 CNBC FA 100 list, the stock market may benefit from increased profitability in the sector, potentially leading to higher stock prices.

"The larger banks probably benefit more from that," Spinelli said.

The bank industry will benefit from less regulation and potentially higher interest rates, as they may be able to lend out more risk-based capital, according to David Rea, president of Salem Investment Counselors in Winston-Salem, North Carolina, which ranks No. 8 on the 2024 CNBC FA 100 list.

Spinelli stated that a potential issue that may reappear is the worry over regional banks' exposure to commercial real estate.

"Spinelli stated that the problems we faced weren't that far in the past, and they likely still exist. Therefore, you wonder if they are still a concern."

—Lorie Konish

Building materials and construction

High mortgage rates have caused the housing market to become "stagnant" in recent years, according to Cox of Ritholtz.

Lower rates could stimulate the growth of the housing and related industries, according to her.

If Trump's policies lead to inflation, the Federal Reserve may need to keep interest rates high, which would increase mortgage rates and negatively impact housing and related sectors.

The housing market's fluctuations affect retailers, particularly home goods stores, as they may struggle if people are not purchasing, renovating, and decorating new homes, according to Cox.

If deregulation accelerates building timelines and reduces costs for developers, it could be "absolutely huge" for the sector, Goldberg said.

Trump has proposed plans to encourage construction and incentivize homeownership, but lacked specifics.

The next administration's housing policies will be closely monitored, according to Cox. However, she noted that there is currently a lack of clarity regarding these initiatives.

Real estate stocks and related stocks, such as real estate investment trusts, home improvement retailers, and home builders, could see positive performance if we observe realistic and well-thought-out policies, according to Cox.

—Greg Iacurci

Crypto

The recent runup of bitcoin ended before it reached a new $100,000 benchmark, but Trump's election has given cryptocurrencies a new sense of optimism.

As the leader of the United States, Trump is predicted to be more open to cryptocurrency than any of his predecessors.

He has already launched a crypto platform, World Liberty Financial, which promotes the use of digital coins.

This year, new methods of investing in crypto have emerged, including the January launch of spot bitcoin ETFs and the addition of bitcoin ETF options.

While only 2.6% of financial advisors recommend crypto to their clients, about 12.1% are open to discussing or using it based on the client's preference. However, 58.9% of advisors do not anticipate ever incorporating cryptocurrency into their client interactions.

According to Matt Apkarian, associate director in Cerulli's product development practice, the main reason advisors aren't investing in cryptocurrency for their clients is because they believe it's not suitable for client portfolios.

Even for advisors who anticipate using crypto at some point, it's "wait and see" regarding the regulatory environment, according to Apkarian.

Research from Mariner Wealth Advisors shows that 90% of financial advisors are receiving questions about cryptocurrency from investors.

Exchange-traded funds are a suitable option for investors who want to minimize the risk of falling prey to crypto's pitfalls, such as scams or losing access to their investments due to unique alphanumeric codes, according to Lynn. Since crypto is more volatile, it's advisable not to invest any money that you anticipate needing for near-term goals, she advised.

Lynn advised investors to treat cryptocurrency as an alternative investment and allocate no more than 5% of their portfolio to it.

"A little bit of this can go a long way," Lynn stated.

—Lorie Konish

Energy

According to Raymond James, the energy sector has experienced a 22.9% gain as of Nov. 19, despite the Biden administration's focus on renewables and sustainability.

The future of the energy sector is uncertain under Trump, who has expressed support for increased oil, gas, and coal production. The sector's outlook could shift if Trump follows through on his campaign promise to repeal the Inflation Reduction Act, a law passed under Biden that includes clean energy incentives.

According to Adam of Raymond James, if Trump continues to make it easier to create more oil supply, that might not be a great thing for oil companies.

Adam stated that since there's an increase in supply, it could decrease the price of oil, which is a major factor in that industry.

According to portfolio manager Mike Cerasoli of Eagle Global Advisors, a Houston-based investment management firm specializing in energy infrastructure, the company is "cautiously optimistic" about the impact of Trump on the sector. Eagle Global Advisors ranks No. 35 on the 2024 CNBC FA 100 list.

"Cerasoli stated that we are more likely to be optimistic than cautious, but we know that Trump is unpredictable."

The Inflation Reduction Act may remain largely intact due to the financial benefits received by the top states that also helped Trump win the election, as stated by Cerasoli.

In a third quarter letter in 2020, Cerasoli wrote that he believed the outlook for energy, oil and gas would not be as dire as some predicted, despite Biden's win.

Four years after his initial message, Cerasoli still has the same outlook on renewables for investors. Following Trump's January inauguration, he anticipates a surge in executive orders.

"Cerasoli stated that after overcoming the initial hurdle, individuals will understand how he intends to handle energy treatment. He believes that people will recognize that the end of the world is not imminent for renewables."

—Lorie Konish

Health care

Robert F. Kennedy Jr. was appointed by Trump to lead the Department of Health and Human Services.

If the U.S. Senate confirms RFK, he would be a "huge wild card" for the health care sector, according to Goldberg of Professional Advisory Services.

According to David Weinstein, a portfolio manager and senior vice president at Dana Investment Advisors, who is ranked No. 4 on CNBC's annual FA 100 ranking, RFK's stance as a prominent vaccine skeptic may negatively impact big vaccine makers like Merck (), Pfizer (PFE) and Moderna (MRNA).

Reducing government spending and raising funds for a tax-cut package may involve cutting Medicaid and the Affordable Care Act, also known as Obamacare, according to experts.

Weinstein stated that publicly traded health companies such as Centene (CNC), HCA Healthcare (HCA), and UnitedHealth (UNH) may be affected by lower volumes of Medicaid patients or consumers facing higher healthcare premiums after losing ACA subsidies.

Those supplying electronics with semiconductors sourced from China could face burdens from tariffs, according to him.

The deregulation of the pharmaceutical industry could benefit companies like Thermo Fisher Scientific and Charles River Laboratories by allowing for faster approvals from the Food and Drug Administration, according to Goldberg.

Vivek Ramaswamy, a former biotech executive appointed as co-head of a new Department of Government Efficiency, has called for streamlined drug approvals. Meanwhile, RFK has advocated for more oversight.

"There's a real dichotomy here," Weinstein said.

"Perhaps we are already at our destination," he remarked.

—Greg Iacurci

Retail

Goldberg stated that tax cuts could increase consumers' disposable income, benefiting companies that sell consumer electronics, clothing, luxury goods, and other items.

Weinstein stated that there is a "high likelihood" of tariffs.

Experts predicted that retailers would likely pass on some of the additional cost to consumers.

Weinstein stated that all physical goods, including apparel, footwear, tools, and appliances, are at risk from tariffs. The impact of tariffs would depend on the structure of the policies.

Weinstein stated that The Home Depot (HD), Lowe's (LOW), and Walmart source a significant portion of their goods from overseas.

During the Q3 earnings call, CEO and president Ted Decker stated that although Home Depot sources more than half of its goods from the U.S. and North America, there will be an impact.

""Tariffs will have an industry-wide impact, regardless of the retailers and distributors importing goods," Decker stated."

Investors should consider owning retailers with high-quality inventory, low debt, and diverse sources, as advised by Goldberg. TJX Companies (), which operates stores such as TJ Maxx, Marshalls, and HomeGoods, serves as an example.

Lorraine Hutchinson, a Bank of America Securities research analyst, stated in a Nov. 21 note that direct imports are only a minor part of its business and TJX sources from multiple countries outside of China.

Goldberg stated that deregulation could benefit smaller retailers and franchises, who are more vulnerable to labor laws, environmental, and compliance costs.

—Greg Iacurci

Technology

In 2024, the technology sector experienced growth, largely due to the contributions of the Magnificent Seven, including , , , , , and .

Despite their broad diversification, investors may still struggle to avoid the names of the top-weighted companies in the S&P 500 index.

The largest sector in the index is information technology, which encompasses all stocks except for Amazon and Google parent Alphabet, with a more than 31% market share.

Google's influence on online search may be limited, as Trump is set to impact antitrust issues.

Salem Investment Counselors' Rea stated that some sales may decline and the cost of raw materials may increase due to any tariffs implemented.

Despite not owning Tesla due to its high valuation, Rea's firm continues to have a significant tech allocation, with high expectations for generative artificial intelligence. Additionally, the firm has recently sold off Palantir, a successful software company that may have become overvalued.

According to Halbert Hargrove's Spinelli, technology valuations are trading well into the high double digits on a price to earnings basis, which often signals forward returns will decline.

Prospective investors who enter now will essentially be purchasing at a premium, according to him.

"Spinelli stated that while it's possible to achieve the same double-digit returns in the next year, historically, your returns are likely to decrease over the next five years."

—Lorie Konish