The new administration has proposed a number of reforms to encourage domestic production, said AMP Capital economist Diana Mousina, such as lower corporate taxes and an adjusted border tax making importing more expensive.
Ms Mousina noted that markets have priced in expectations that these reforms will boost US growth and inflation, and investors should look to US-based companies to take advantage of the proposed reforms.
Investors would benefit from being overweight to corporates with sizeable US earnings or above-average effective tax rates.
“Investors could also maintain exposure to sectors that benefit the most from a corporate tax cut,” Ms Mousina said.
The banking, consumer staples, telecommunications and consumer discretionary sectors are among those set to benefit the most due to their currently above-average tax rate.
Ms Mousina did, however, caution the US dollar could appreciate on the back of higher growth, inflation and interest rate expectations, and that this could “put a halt on a rebound in earnings and growth for exporters”, adding that investors should “keep a close eye” on the currency.
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