Important security note: Warning of attempted fraud in the name of DWS
We have detected that fraudulent individuals are misusing the "DWS" trademark and the names of DWS employees on the internet and social media. These fraudsters are operating fake websites, Facebook pages, and WhatsApp groups. Please be aware that DWS does not have any Facebook Ambassador profiles or WhatsApp chats. If you receive any unexpected calls, messages, or emails claiming to be from DWS, exercise caution and do not make any payments or disclose personal information. We encourage you to report any suspicious activity to info@dws.com, including any relevant documents and the original fraudulent email. Additionally, if you believe you have been a victim of fraud, please notify your local authorities and take steps to protect yourself.
12/11/2024
Trump returns: Priorities are growth and winning
David Bianco
Chief Investment Officer, Americas
The decisive win for Trump and Republicans lends support to their policy proposals and empowers them to act. Markets now expect deregulation and some tax cuts. Investors also understand that the election appears to consent to Trump’s plan to use tariffs as a geopolitical tool and indicates that the electorate is concerned about unlawful immigration. These latter two issues pose risks to the economy and markets, but there is optimism that a balance in actions will be found and perhaps improvements for the longer-term will be made by addressing these matters head-on. The central view is more positive for the economy and stocks, but likely comes with greater tail risks. In our view, the country seeks new solutions to festering problems. For new leadership, it’s a big opportunity, responsibility and risk.
We expect new and higher tariffs to be imposed on China. Probably not as high as 60%, at least not at first. We remain doubtful of tariffs on all imports. We believe the US will seek a more cooperative relationship with China on geopolitical matters. Signs of cooperation could help avoid an escalation of tariffs. If tariffs must escalate on China, then the US will likely seek that its allies also tariff China’s exports; those that don’t could face US tariffs. The President and administration will likely have wide latitude in these matters, especially with a Republican Congress, because it ties to national security and foreign policy interests.
Extending Trump household tax cuts beyond the 2025 sunset and changing corporate taxes will require an act of Congress. We think this will be a first 100-day legislative priority for the administration. We’re unsure how significant any net tax reductions might be from 2024 levels, but we think the priority will be to avoid higher personal taxes for all. If new tariffs take effect, we think it will be a priority to cut taxes for manufacturing firms. This would likely take the form of a percentage of pretax profits deduction for domestic manufacturing derived profits and probably leave the U.S. corporate tax rate unchanged at 21%. Other changes are possible, but a substantial hit to federal revenue that exacerbates the deficit runs the risk of upsetting the bond market. The bond market holds the veto here.
Leadership at federal agencies will change. Priorities of deregulation, agency efficiency and new tone from top of cooperation with private industry. This alone is something fueling an enthusiastic sentiment to the election so far in most of corporate America. Financials, Healthcare, Communications and Tech are encouraged. The energy sector will likely be allowed and likely prodded to produce more and more in the U.S. If companies take new land leases they will be expected to produce even if oil prices fall. We think oil prices are likely range bound at the lower end of Inflation adjusted past 20-year norms. Because transport fuel costs are likely to be benign and many manufacturers and good retailers are likely to build up inventories ahead of tariffs, we think transports and logistics firms could soon exit their post pandemic volume and profits Recession. Despite pro fossil fuel energy policies, the country’s trend toward more electricity usage will continue owing to datacenters. We think pursuing all-of-the-above energy policies will be favored. Ramping up electricity generation will be expensive and poses inflation risk. The administration might consider structuring and granting carbon credits to utilities and others for the private sector to voluntarily buy to meet their climate goals. That said, we see pricing power at electric, not oil and gas.
Given the likely continuation of healthy US economic growth, the potential of deregulation and the potential for corporate tax cuts, we raise our 2025 estimated S&P Earnings per share (EPS) to $275. We believe that S&P EPS will likely be between $270 to $280 in 2025, 10-15% year-over-year (y/y) growth, depending on how well optimized the mix of lower taxes and higher tariffs plays out. As before, we continue to expect 20% y/y growth from the Great Eight digital companies of the S&P 500. 2026 is uncertain, but $300 or slightly more is within reach if AI boosts trend productivity.
We think S&P 500 stays in a 5700-6300 range until worst of tariff risks appear diminished and material corporate tax cuts appear likely. The deficit is likely to reach records outside of a recession, it’s important that 10-year Treasury yields do not exceed 4.5% to support the roughly 21.5+ current forward S&P Price-to-earnings (P/E) ratio or multiple. Our strategic 12-month targets are under review.
This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation. Past performance is not indicative of future returns. Forecasts are not a reliable indicator of future performance. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect. Alternative investments may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency. Alternatives are not suitable for all clients. Source: DWS Investment GmbH.
DWS is the brand name of DWS Group GmbH & Co. KGaA and its subsidiaries under which they do business. The DWS legal entities offering products or services are specified in the relevant documentation. DWS, through DWS Group GmbH & Co. KGaA, its affiliated companies and its officers and employees (collectively “DWS”) are communicating this document in good faith and on the following basis.
This document is for information/discussion purposes only and does not constitute an offer, recommendation or solicitation to conclude a transaction and should not be treated as investment advice.
This document is intended to be a marketing communication, not a financial analysis. Accordingly, it may not comply with legal obligations requiring the impartiality of financial analysis or prohibiting trading prior to the publication of a financial analysis.
This document contains forward looking statements. Forward looking statements include, but are not limited to assumptions, estimates, projections, opinions, models and hypothetical performance analysis. No representation or warranty is made by DWS as to the reasonableness or completeness of such forward looking statements. Past performance is no guarantee of future results.
The information contained in this document is obtained from sources believed to be reliable. DWS does not guarantee the accuracy, completeness or fairness of such information. All third party data is copyrighted by and proprietary to the provider. DWS has no obligation to update, modify or amend this document or to otherwise notify the recipient in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Investments are subject to various risks. Detailed information on risks is contained in the relevant offering documents.
No liability for any error or omission is accepted by DWS. Opinions and estimates may be changed without notice and involve a number of assumptions which may not prove valid.
DWS does not give taxation or legal advice.
This document may not be reproduced or circulated without DWS’s written authority.
This document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, including the United States, where such distribution, publication, availability or use would be contrary to law or regulation or which would subject DWS to any registration or licensing requirement within such jurisdiction not currently met within such jurisdiction. Persons into whose possession this document may come are required to inform themselves of, and to observe, such restrictions.
For institutional / professional investors in Taiwan:
This document is distributed to professional investors only and not others. Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.
© 2024 DWS Investment GmbH
Issued in the UK by DWS Investments UK Limited which is authorised and regulated in the UK by the Financial Conduct Authority.
© 2024 DWS Investments UK Limited
In Hong Kong, this document is issued by DWS Investments Hong Kong Limited. The content of this document has not been reviewed by the Securities and Futures Commission.
© 2024 DWS Investments Hong Kong Limited
In Singapore, this document is issued by DWS Investments Singapore Limited. The content of this document has not been reviewed by the Monetary Authority of Singapore.
© 2024 DWS Investments Singapore Limited
In Australia, this document is issued by DWS Investments Australia Limited (ABN: 52 074 599 401) (AFSL 499640). The content of this document has not been reviewed by the Australian Securities and Investments Commission.
© 2024 DWS Investments Australia Limited
Financial Professional
Individual Investor
Institutional Investor
The content of this website (the “Website”) is intended exclusively for persons who are resident in Ireland or who access this website from Ireland.
U.S. Persons are not eligible to invest in shares of such investment funds which are stated on the following websites. By clicking on “I accept”, I confirm that I am not a citizen of the United States, that neither my place of residence nor place of business is in the United States and especially I am not a person that is a “U.S. Person” as such term is defined under Regulation S of the U.S. Securities Act of 1933.
The use of this Website is subject to (i) Irish law and (ii) the Terms of Use of this Website. Please read the Terms of Use carefully.
By entering this Website, you agree to accept the Terms of Use of this Website.
