Yet, industry impacts may vary widely. Energy companies, especially those in oil and gas, could benefit from reduced regulations, while renewable energy businesses may face pressure if parts of the Inflation Reduction Act (IRA) are repealed.
In the financial sector, there is potential for gains under Trump’s likely approach of reduced oversight, according to the report.
As the market adjusts to the anticipated policy environment, Pettit added a note of caution regarding interest rates. While immediate market responses have been positive, he highlighted that rising interest rates could limit the long-term fair value of equities, particularly for small-cap stocks.
He noted, “Longer run if rates stay higher, we think that really caps fair value on equity markets including small cap.”
In line with Pettit’s observations, T. Rowe Price emphasizes the need for caution around long-term economic implications. Higher inflation expectations could push bond yields upward, which may weigh on the valuation that equity investors are willing to pay for future cash flows.
