Sector winners and losers of the "big, beautiful bill"
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Manufacturing and defense companies stand to win from the "big, beautiful bill," while wind and solar fare worse and hospitals could be hit hard.
Why it matters: Investors welcome the certainty of the bill, but are also nervous about heavily exposed sectors.
The big picture: Companies will get expanded provisions on itemization and expenses, including 100% bonus depreciation, which allows business to deduct expenses immediately rather than over three years.
- Henrietta Treyz of Veda Partners says this could benefit manufacturers, although the stimulative effects of the bill could be muted by tariffs on things like steel and aluminum.
- "The John Deeres and Caterpillars of the world benefit from a 100% bonus depreciation" historically, she says.
Defense spending also benefits, as armed services spending is set to increase by $150 billion under the bill.
- Couple that with the administration's push to grow the defense budget to over $1 trillion annually and it's a boost in spending that "markets do not appreciate…at all," says Terry Haines, founder of Pangaea Policy.
- Palantir, an AI-focused defense contractor with ties to Donald Trump, is still among the top five best-performing stocks in the S&P 500 this year.
The other side: While a proposed tax on wind and solar projects was taken out of the bill, tax credits are still set to be removed.
- Tax credits are key to the economics of solar installation investments, and "for many in that sector, this bill would represent their fears confirmed," per a statement from John Gimigliano, principal in charge of federal tax legislative and regulatory services at KPMG U.S.
- The removal of a $7,500 electric vehicle tax credit is set to be a headwind for EV sales, which could be another pain point for Tesla (though its stock recently rallied even after soft delivery numbers.)
Hospitals have "just gotten absolutely smoked, so much so that quite frankly there's no way that these cuts go into effect," according to Treyz.
- The Congressional Budget Office has estimated $1.1 trillion in health care cuts from the bill. This could weigh on hospital REITs that benefited from that government spending.
- The loss of social safety nets for millions of Americans could be an additional pressure point to the broader economy over time.
The bottom line: Winners and losers aside, at least the market has a better handle on what's coming now.
- "Whatever you think of the bill, these folks have created a lot more certainty in the markets," Haines at Pangea says.
