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As the excitement of the US election fades, investors’ attention is returning to economic fundamentals and the ability of businesses to deliver shareholder returns. Investors are increasingly factoring what Republican control of government could mean for stocks, bonds and currencies.

The clean sweep scenario, in which Republicans control the White House and both houses of Congress, could clear the way for Trump to implement his economic proposals with a freer hand. Many, such as tax cuts, are seen as being growth-friendly but also driving up inflation risks.

Expectations that such policies will be pushed through under Trump to some degrees have helped lift corners of the stock market higher, boost the dollar and weigh on Treasuries, as investors recalibrate their portfolios for stronger growth, looser regulations and the possibility that inflation worries could keep the Federal Reserve from cutting rates too deeply next year.

In terms of sectors, here’s what to expect.

Fossil fuels

Former President Donald Trump’s return to the White House gives him the chance to fulfill the “drill, baby, drill” promises he made on the campaign trail. However with the United States already producing more oil than any other country in history, there’s not much Trump could do to take much more out of the ground, according to Rachel Ziemba, head of economic consulting firm Ziemba Insights.

Trump is however likely to again withdraw the US from the Paris agreement and to rescind the Environmental Protection Agency’s (EPA) mandates for electric vehicle sales, which currently require 56% of new vehicles sold to be electric by 2032. He could also remove the tax incentives for electric vehicles under the Inflation Reduction Act.

Pharmaceuticals

Reducing the cost of drugs and boosting domestic production of essential medicines is another initiative that Trump could undertake, which could be advantageous for US pharmaceutical companies, particularly Biotechs. Emphasis on domestic production of essential medicines could favour companies with U.S.-based facilities or those that can expand local manufacturing.

Companies heavily reliant on international supply chains or foreign production might face headwinds or higher operational costs.

End to Conflict

Trump’s desire for an ‘immediate end’ to the conflicts in the Middle East and Ukraine could benefit US construction companies but could have a negative impact on arms-related businesses. While it’s too early to forecast with confidence, analysts who spoke to Defense News said, the return of a Trump presidency will likely augur a larger defense budget, though less security aid for American partners abroad like Ukraine.

If Trump’s goals to end conflicts lead to reduced defense spending, large defense contractors may face reduced demand. However, defense contractors focused on domestic security or border protection might remain viable.

An emphasis on rebuilding post-conflict areas could benefit U.S. construction companies with global reach.

Education

Trump plans to transfer control of education from the federal Department of Education to state governments, which he believes are better placed to tailor education policies to their communities. Trump’s campaign has outlined a plan that features prayer in public schools, an expansion of parental rights in education, patriotism as a centerpiece of education and an emphasis on the “American Way of Life.” For higher education Trump’s agenda includes creating a new, free university called the “American Academy” and fund it by “taxing, fining and suing” private universities.

Education technology players could well benefit from this. Shifting educational control to states may boost demand for digital education solutions that cater to state-specific needs. Private education providers and testing services may also see benefits from increased local adoption.

Small- & mid-Caps

Small and mid-cap stocks should benefit from a Trump presidency because of his pro-business policies, which stimulate economic growth and create opportunities for these companies. In addition, small-caps benefit from the prospect of lower interest rates, which reduce borrowing costs for the many unprofitable companies in the sector that rely on debt finance.

Prisons

President Elect Donald Trump has repeatedly vowed in campaign rallies that he plans to not only go back to the tough immigration policies of his first term in office, but expand them greatly- and carry out the largest deportation operation in American history according to his 20 Core Promises.

European and Chinese equities could be initially negatively impacted. The European automotive industry would be particularly vulnerable to a potential trade war with the United States, because of tariffs. President Elect Trump has announced his intention to impose a blanket 10% tariff ranging from 10% to 20% on ALL imports along with 60% to 100% on products imported from China.

In summary following a Trump victory, the portfolio would ideally tilt toward U.S.-centric, pro-energy, small-cap, and pro-manufacturing sectors while reducing exposure to ESG, renewable energy, and regions vulnerable to trade disputes like Europe and China.