Trump Trade 2.0 is just getting started: AlpineMacro

Investing.com -- The Republican sweep of Washington has initiated what Alpine Macro (BCBA:BMAm ) refers to as "Trump Trade 2.0," a recalibration of equity markets with opportunities for growth.

In their latest note, Alpine Macro asserts that this new phase "is just getting started" and that the market dynamics are now shaped by key policy areas: taxes, trade, regulation, and security.

Tax reform is expected to provide a significant tailwind, according to the firm.

Alpine Macro notes that the extension or modification of elements from the Tax Cuts and Jobs Act could eliminate risks of higher corporate rates while introducing potential sweeteners like depreciation benefits for R&D investments.

"The possibility of tax hikes is off the table," the report states, creating optimism for equity investors.

Trade policy is said to remain a risk, with Alpine Macro emphasizing the potential for targeted tariffs that could weigh on sectors like Industrials and Materials.

However, they highlight that such moves are likely to be restrained by the administration's focus on stock market performance and inflation sensitivity.

A similar approach to the 2018 "Phase One" trade agreement with China is expected.

Deregulation is expected to be a cornerstone of the Trump administration's policy outlook, benefiting industries like energy, healthcare, and financials.

Defense spending is expected to rise, with proposals for a 5% GDP allocation boosting opportunities for aerospace and industrial companies.

Despite these opportunities, Alpine Macro warns that sectors such as Materials and Consumer Staples may face challenges from trade and labor pressures.

In addition, Alpine says energy stocks might underperform "as deregulatory efforts signal increasing supply and puts downward pressure on commodity prices and cash flows."

The firm concludes that "Trump Trade 2.0" offers opportunities, particularly in Financials , Industrials, and Quality stocks, while urging investors to remain cautious of macroeconomic reflexivity and rising yields.

Source: Investing.com