MW These 6 stocks will tell you if Trump's economic policies are working or not

By Adrian Helfert

The Trump administration sees the stock market as a measure of its success

Any misstep or delay in policy implementation could result in heightened volatility and market corrections.

The first 100 days of Donald Trump's presidency are a critical period to gauge the trajectory of the U.S. economy and its markets, as well as the early success of his second term. While policy changes may take longer to manifest than many anticipate, several bellwether stocks and key economic indicators will shed light on the administration's progress in its early days.

Trump's tariffs add another layer to the policy puzzle. The impact of these tariffs will vary by industry and company, depending on their reliance on imports and exposure to potential retaliatory measures. However, regardless of these differences, the performance of key stocks will serve as a strong indicator of whether these policies bolster or hinder economic momentum in the administration's crucial early phase.

Risk-on, risk-off

The Trump administration has emphasized the stock market as a measure of success of its economic policies, a departure from traditional, harder-to-measure and less-frequent metrics like income equality. By focusing on market returns, the administration aims to project confidence and attract investment that stimulates growth. However, this strategy also raises the stakes; any misstep or delay in policy implementation could result in heightened volatility and market corrections.

Small businesses and lower-income households are critical to economic growth. High credit-card rates, regulatory burdens and limited credit access challenge both small-cap companies and the consumer sectors. If policies do not address these issues, underperformance may follow. Strong consumer spending and real wage growth are key, but disparities remain, particularly for the lower-income segment, making targeted support essential for sustained growth.

The market has already priced in significant optimism, expecting rapid policy implementation and immediate economic impact. Yet the U.S. economy resembles a supertanker more than a speedboat; even aggressive policies take time to produce noticeable shifts in economic fundamentals. This disconnect between market expectations and the pace of actual economic change creates a potential risk of an equity market "valuation reset" if results fail to materialize.

Two key metrics for evaluating the market's reaction to the administration's policies are risk-on and risk-off dynamics, along with sector rotations. A risk-on environment generally reflects market confidence in the administration's effectiveness, leading to gains in sectors like technology, defense, real estate and financials. Conversely, a risk-off scenario, marked by underperformance in these sectors, could signal declining confidence.

For example, the S&P 500's SPX consumer staples sector, often considered a safety trade, may lag in a robust risk-on environment. Similarly, certain segments of the energy sector, such as exploration and production, face uncertainties tied to supply-demand dynamics and export policies. Within energy, however, service companies such as Schlumberger $(SLB)$ and Baker Hughes $(BKR)$, for example, could capitalize on modernization and capital expenditure needs.

6 stocks to watch - and why

Several stocks serve as key indicators of Trump policy effectiveness. In the early phase, attributing economic outcomes to new policies can be complex, making it prudent to observe these stocks over at least the first 100 days.

1. Caterpillar $(CAT)$: Reflects infrastructure and agricultural spending. Potential gains depend on regulatory shifts and trade policy impacts.

2. Nvidia $(NVDA)$: As a leader in AI and semiconductors, Nvidia's trajectory will highlight the administration's support for technology and regulatory ease.

3. Alibaba $(BABA)$: This major Chinese stock will react to tariffs and competition in the global tech sector.

4. CBRE Group $(CBRE)$: A barometer for commercial real estate, CBRE will reflect how policies influence asset prices and investment.

5. Cullen/Frost Bankers $(CFR)$: A regional U.S. bank benefiting from deregulation and a steeper yield curve, indicating financial policy effectiveness.

6. Huntington Ingalls Industries $(HII)$: Key to defense-sector performance, HII's gains would signal success in military expansion efforts.

This is one of the most impactful first 100 days in presidential history.

The first 100 days of Trump's presidency represent a pivotal period for assessing the administration's ability to deliver on its promises, and is often viewed as an important measure of a new administration's key policy priorities. With the Trump administration's mandate for change given the outcome of the election and the history from his first term, this is one of the most impactful first 100 days in presidential history. The astonishing number of executive actions Trump has produced since taking office on Jan. 20 illustrate this clearly. And the uncertainty of economic upside versus the downside outcome is larger than in a typical transition.

Price changes in these bellwether stocks across sectors like technology, defense, real estate and finance over the next several months will likely provide critical insights into the effectiveness of policy changes. While the market's optimism is evident, the disconnect between expectations and the pace of economic transformation poses risks.

Addressing the challenges faced by small businesses and lower-income groups will be essential if Trump's policies are to produce sustained growth and stability. The trajectory set during this period could shape the U.S. economic landscape for years to come. Keep an eye on these six bellwether stocks to see exactly what trajectory emerges.

Adrian Helfert is chief investment officer of alternative and multi-asset portfolios at investment firm Westwood Holdings Group.

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-Adrian Helfert

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February 15, 2025 12:09 ET (17:09 GMT)

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