Trump’s economic agenda is creating distinct winners and losers in the equity markets, according to Morgan Stanley Wealth Management. The firm’s Chief Investment Officer, Lisa Shalett, says the effects of Trump-era tax reform and the broad imposition of tariffs are accelerating key structural shifts—and advisors should take note.
“As the impacts of the tax reform bill and global tariff implementation begin to roll through the economy, we’re seeing new and important divides open up,” Shalett said in a recent market outlook podcast.
These shifts are producing market bifurcations that RIAs and wealth managers can’t afford to ignore, especially when constructing portfolios designed to weather volatility and capitalize on long-term structural advantages.
Key Divide #1: Consumer-Facing vs. B2B Companies
Consumer-facing businesses are becoming more vulnerable to weakening household balance sheets. As tariffs raise the cost of imported goods, many companies are passing that expense onto consumers through higher prices. That’s adding pressure at a time when household financial stress is rising.
Delinquencies on credit cards and auto loans are climbing, and labor market data is showing cracks. Revisions to May and June payrolls were sharply lower, and July job creation missed forecasts—both warning signs for consumer spending ahead.
In contrast, business-to-business companies are less exposed to household demand fluctuations and could offer more resilience in the current climate.
Key Divide #2: Multinational Exporters vs. Import-Heavy Firms
Exporters operating outside the consumer sector—particularly those with multinational footprints—are facing fewer trade-related headwinds. A weakening U.S. dollar is providing an additional tailwind, making U.S.-produced goods more competitive abroad.
These global companies are typically more capital- and R&D-intensive, meaning they stand to benefit more from the tax law’s incentives for domestic investment. Shalett emphasized that the “One Big Beautiful Bill” still offers underappreciated advantages for firms with significant R&D and capex spending.
“For advisors, this emerging structural divide means that global stock selection is more critical than ever,” Shalett said.
The Morgan Stanley Playbook for Allocators
Shalett recommends that investors—and the advisors guiding them—prioritize equities with the following characteristics:
-
Multinational, non-consumer exporters: These companies continue to benefit from favorable currency dynamics, a more open global playing field, and R&D tax incentives.
-
Select sector exposure: Opportunities are emerging in specific areas—namely technology, financials, industrials, energy, and healthcare—where companies may see upside surprises in earnings and free cash flow tied to tax reform provisions.
-
Valuation discipline: Shalett warns against chasing momentum in overhyped names. She recommends seeking companies with strong fundamentals that haven’t yet been priced to perfection.
-
Diversification beyond U.S. equities: International equities, commodities, and energy infrastructure are all worth a closer look, both for return potential and diversification benefits.
A Shift in Sentiment
While the equity market has shown remarkable resilience, sentiment has started to turn more cautious. Trump has doubled down on tariff threats, and economic data continues to underwhelm. That’s prompting some major firms—including Goldman Sachs, Evercore ISI, Stifel, Pimco, and HSBC—to warn of potential corrections or urge portfolio repositioning.
For wealth managers, the message is clear: Political tailwinds and headwinds are no longer sector-agnostic. The dispersion between policy beneficiaries and policy casualties is growing, and asset selection must adapt accordingly.
This environment calls for a more global, more tactical, and more fundamentals-driven approach. Advisors who can steer clients toward structural winners—while avoiding politically exposed pitfalls—will be better positioned to navigate the next chapter of market volatility.
