Specific sectors of the market could be standout winners once President-elect Donald Trump returns to the White House on Monday, according to Alpine Macro. Those pockets include small caps, industrials, fossil energy, and aerospace and defense stocks, Dan Alamariu, the firm’s chief geopolitical strategist, wrote in a Thursday note. Specifically, he suggested investors go long on oil stocks and small-cap industrials, and short on crude oil prices, alternative energy and specialty retailers. Alpine Macro’s picks come as stocks linked to the so-called Trump trade came back to life this week, including the Russell 2000 and defense and energy stocks. More broadly, stocks notched their best week since early November and turned green for the year after a weak start in January. .RUT 3M mountain Russell 2000, 3 months Stocks linked to Trump’s return to the White House rallied on the heels of his election in November, as the president-elect has long espoused deregulation and pro-domestic manufacturing policies that investors viewed as beneficial for small caps and banking. His rhetoric that allies need to increase their defense spending to better align with the United States’ contribution to NATO also helped lift defense stocks. But the trade seemed to weaken at the start of the year, only to come roaring back. The Russell 2000 has advanced 4% this week, alongside the S & P Aerospace & Defense Select Industry Index ETF (XAR) . “The Alpine Macro view is that U.S. equities should continue to perform well in 2025, as the Trump administration will be pro-growth and prioritize market-friendly, rather moderate policies,” Alamariu said. XAR 3M mountain S & P Aerospace & Defense Select Industry Index ETF (XAR), 3 months That said, he cautioned that the new administration’s first 100 days could be marked with volatility. Also, he said, the market remains vulnerable to a potential correction due to geopolitical and domestic risks, as well as headwinds from Trump’s tariff plans. Although Trump remains an advocate of U.S. energy dominance and independence, Alamariu expects this stance will help oil stocks more than oil prices. Oil companies, particularly U.S. shale producers, are likely to benefit from gaining a bigger share of the global oil market. “Trump’s Day 1 EOs will emphasize ‘drill, baby drill,'” he wrote. “Policies will include withdrawing from the Paris Climate Accords, opening federal lands to fossil fuel production, lifting Biden’s restrictions on LNG exports, rescinding EPA power plant emission rules, and rolling back SEC climate disclosure re- quirements.” And because Trump has pushed for allies to increase military spending and purchase U.S.-made equipment, Alamariu said, aerospace and defense stocks are well positioned, especially those that supply airpower equipment or defense names that have underperformed their peers. To be sure, Alamariu said Trump’s call for tariffs on global imports remains a potential headwind to markets until more clarity is given. “If any policy is most likely to dislocate markets and the economy, it is Trump’s approach to tariffs,” Alamariu said. “The economic and policymaking consensus on tariffs has been slowly shifting in favor, but the Trump’s administration may not yet have decided how to proceed.”
