What else does Trump have up his sleeve?

On the campaign trail, Trump made a series of pledges to boost the US economy through a massive fiscal stimulus, of which tax reform is only one part. The second part of this fiscal pledge is an expected infrastructure investment plan, something the President then reiterated in his electoral acceptance speech. He pledged to spend up to $1 trillion on aging US infrastructure, covering roads, bridges and oil pipelines. While he has made some progress on the latter (signing executive orders to complete two pipelines), as of the week ending 24 February he is yet to formalise those plans. Could we see this announced alongside a potential tax plan?

Another policy pledge made by Trump that has helped the stock market rally was to repeal parts of the Dodd-Frank act, the complicated legislation put in place by the Obama administration to limit risky transactions in the banking sector. Furthermore, the President has already signed an executive order for his team to investigate.

However, some of the President’s economic pledges might not benefit US businesses. During his election campaign, Trump’s rhetoric became increasingly protectionist when it came to global trade, particularly concerning China. Any change to US trade laws could harm importers, which has seen underperformance against their exporting counterparts. Could Trump’s team convince him to take a step back from his anti-China vendetta?

Which stocks have outperformed since Trump’s inauguration?

The below table shows the top 5 Dow Jones winners and losers since Trump’s inauguration ceremony, his election as well as showing how they performed on the day after he won the US presidency.

Far and away the biggest winners on the blue-chip Index are Apple and Cisco, both having rallied in expectation that the aforementioned repatriation tax will be reduced – the FT estimates Apple has $230bn stashed overseas, over 90% of its profits. Also note the performances of JP Morgan and Goldman Sachs since the election, with both having rallied strongly on hopes that Trump will move to de-regulate the banking sector, while the appointment of several former Goldman employees to senior administration positions certainly helps.

Verizon is the standout loser, as investors remain downbeat given that Trump opposes large mergers as Verizon looks to acquire Yahoo!. However, the most surprising name on the list is Exxon Mobil. One of Trump’s first senior appointments was Exxon CEO Rex Tillerson as his Secretary of State, yet the company’s shares have underperformed. Why? US protectionism would greatly impact exporting names, including Exxon and sector peer Chevron, while Intel and General Electric are also likely to be affected. Note, however, all of these stocks (ex-Exxon) have rallied since the election, suggesting investor sentiment remains bullish for US equities.

Over the page, we have picked four of the most exciting US stocks that we think could move significantly once the tax reform is announced, whenever that may be. How do you think the shares of these US giants will react?