As the Trump Administration 2.0 makes its debut, comparing the economic ideologies of the first and second Trump administrations reveals a shared emphasis on supporting large-scale domestic tax cuts.

Looking back to 2017, Trump signed the largest tax cut bill in the U.S. in nearly 30 years, significantly reducing the burden of personal income taxes and corporate taxes. Notably, the corporate tax rate was slashed from 35% to 21%.

The main economic proposals of Trump Administration 2.0 include domestic tax relief, broad tariff impositions, and cuts in fiscal spending. 

Market analysts predict that Trump's stance on tax policies during this term might be even more aggressive.

During his campaign, Trump announced that if elected, he would permanently reduce the federal standard corporate tax rate from 35% to 21% and even proposed further lowering it to 15%, specifically for companies that manufacture domestically. This tax policy aims to encourage manufacturing to return to the U.S.

As Trump wins the election and secures both the Senate and the House, the possibility of substantial tax cuts has significantly increased.

Moreover, U.S. Treasury Secretary nominee Besant stated in his first interview that his policy priorities would include fulfilling Trump's various tax cut promises, including making the tax cuts from his first term permanent and eliminating taxes on tips, Social Security benefits, and overtime pay.

Besant believes that extending Trump's tax cuts and deregulating parts of the U.S. economy could result in an "economic bonanza".

How Will Tax Cuts Impact Various Sectors?

Based on this tax cut logic, JPMorgan recently published a report pointing out that:

Trump's tax cut proposals mainly target domestic manufacturers, so the proportion of revenue from the U.S. is crucial in determining which companies will benefit; companies that already have a relatively low effective tax rate will see limited impact from the cuts.

JPMorgan further points out that companies in the S&P 500 index with an effective tax rate above 15% and 80% of revenue coming from the U.S. are potential beneficiaries of Trump's tax policy, primarily concentrated in the financial and industrial sectors, followed by consumer staples, consumer discretionary, and healthcare sectors.

By Industry:

• Financials

On November 6th, as Trump announced his election victory, the U.S. stock market responded rapidly, with the financial sector seeing a significant rise at the opening, with the PARTNERS BANK CALIFORNIA(PBKX.US) soaring over 10%, reaching its highest level since early 2022.

Investors widely expect that Trump's tax and tariff policies will lead the Fed to maintain a high-interest-rate environment, pushing U.S. Treasury yields higher. Higher yields mean banks can achieve greater net interest income, boosting market confidence in bank profitability.

Additionally, investors anticipate that Trump will ease regulations on the financial industry. Specifically, the Trump administration might further reduce the required capital reserves for banks, lowering operating costs for financial institutions.

Private equity groups are also likely to benefit from Trump's looser merger and acquisition regulations. On the first trading day after Trump's election, private equity-related stocks also rose. Analysts believe that looser M&A regulations will reduce compliance costs for private equity groups in transactions, thereby increasing their investment returns.

JPMorgan believes that in the financial sector,  Blackstone Group L.P.(BX.US), Progressive Corporation(PGR.US), Fiserv(FI.US), PNC Financial Services Group, Inc.(PNC.US), and U.S. Bancorp(USB.US) are set to lead.

• Industrials

Previously, during his campaign, Trump proposed "New American Industrialism," which aims to reduce taxes for companies manufacturing in the U.S. and impose tariffs on those that don't.

Trump's move is designed to support domestic manufacturers. Reports suggest that his "New American Industrialism" plan might include slashing taxes for domestic manufacturers from 21% to 15%, imposing 10%-20% tariffs on imported goods, reducing regulations on domestic manufacturers, and offering land to potential investors.

JPMorgan believes that in the industrial sector, Leidos Holdings, Inc.(LDOS.US), Paycom Software, Inc.(PAYC.US), Rollins, Inc.(ROL.US), Verisk Analytics Inc(VRSK.US), and Old Dominion Freight Line(ODFL.US) will perform the best.

• Consumer Staples

Tax cuts have a positive impact on the U.S. economy, as reducing corporate and personal income taxes effectively enhances corporate profitability and disposable income, thereby stimulating domestic investment and consumer demand.

Revisiting the tax reform measures implemented during Trump's tenure, corporate profits significantly increased within just six months of their enactment, leading to an expansion in consumer demand.

JPMorgan believes that in the consumer staples sector, ConAgra Foods, Inc.(CAG.US), Clorox Company(CLX.US), Altria Group, Inc.(MO.US), Wal-Mart Stores, Inc.(WMT.US), and Campbell Soup Company(CPB.US) will be the first to benefit.

• Consumer Discretionary

The logic for the consumer discretionary sector benefiting is similar.

JPMorgan believes that in the consumer discretionary sector, CarMax, Inc.(KMX.US), PulteGroup(PHM.US), Ross Stores, Inc.(ROST.US), Lowe's Companies, Inc.(LOW.US), and Home Depot, Inc.(HD.US) will benefit the most.

Healthcare

During Trump's previous term, he encouraged U.S. companies to repatriate large amounts of capital retained overseas and significantly reduced taxes on corporate mergers and repatriated funds.

Historically, large U.S. pharmaceutical companies preferred to use overseas funds for acquiring foreign entities rather than repatriate them to face a 35% tax rate. Trump proposed lowering this repatriation tax rate significantly to 10%, aiming to encourage companies to use some funds for expanding hiring and increasing investment.

JPMorgan believes that in the healthcare sector, Laboratory Corporation of America Holdings(LH.US), Cardinal Health, Inc.(CAH.US), Incyte Corporation(INCY.US), Molina Healthcare, Inc.(MOH.US), and Centene Corporation(CNC.US) will perform the best.