Which Stocks Will Benefit from Trump’s OBBBA?... Key U.S. Investment Points for the Second Half [Practical Wealth Management]

Various Cost Benefits Expected to Favor Tech-Intensive Industries
Banks Respond to Financial Deregulation with Increased Dividends
The Return of M7 as Market Leaders Also in Focus

With the passage of the large-scale tax cut and spending reduction bill (OBBBA) led by U.S. President Donald Trump through Congress, related industries are showing mixed reactions. While an astronomical fiscal deficit is expected as a side effect, provisions such as cost deduction benefits and expanded defense spending are anticipated to provide a boost to related companies and their stock prices. Which sectors should overseas retail investors pay attention to in the second half of the year?

'ABCDEF' (AI, Bio, Content, Defense, Energy, Manufacturing) on the Rise

The area that has seen the greatest increase in this Trump tax plan is the various cost deduction benefits for companies. The bill includes permanent corporate and income tax cuts, immediate deduction of research and development (R&D) expenses, and 100% bonus depreciation. 'Bonus depreciation' refers to a system that allows companies to fully expense purchased assets in the year of purchase, instead of depreciating them over several years.

Industries expected to benefit include those with high capital investment and R&D ratios, such as semiconductors, artificial intelligence (AI) servers, biotechnology, and industrial automation. With improved cash flow based on tax incentives, companies can accelerate the groundbreaking of new fabs (semiconductor factories) or research centers, shortening the time required to realize profits. In particular, the tax credit for semiconductor plant construction in the U.S., which has been raised from 25% to 35%, is expected to further accelerate the reshoring trend and contribute to strengthening the local semiconductor supply chain.

Jo Yeonju, a researcher at NH Investment & Securities, said, "During Trump’s first term, these depreciation benefits were significant, and related companies’ stock prices outperformed benchmarks," adding, "Among the sectors that benefited from the bonus depreciation policy, those with high capital expenditure (CAPEX) ratios were transportation, capital goods, utilities, telecommunications, and media/entertainment, in that order." She cited Rockwell, UPS, and FedEx as representative beneficiaries.

Choi Bowon, a researcher at Korea Investment & Securities, said, "There are high expectations for increased spending and deregulation from the Trump administration, and it is important to select companies with strong growth potential in their industries." He named Caterpillar (heavy equipment), Rockwell (industrial automation), AEP (electric utility), and Palo Alto (cybersecurity) as beneficiaries. In addition, the U.S. defense budget, which has been increased to as much as $1 trillion (about 1,364 trillion won), including the construction of the next-generation missile defense system 'Golden Dome,' is also expected to improve investment sentiment for defense stocks.

Responding to Deregulation... Financial Stocks Gain Dividend Appeal

Financial deregulation is also considered one of the fastest policies to be implemented following the passage of President Trump’s tax plan. As concerns about a slowdown in the U.S. economy persist, financial deregulation is essential for the interest rate stabilization that President Trump desires. In fact, with the recent easing of the Federal Reserve’s capital adequacy assessment (stress test) standards, major banks such as JPMorgan, Bank of America (BoA), Citigroup, Wells Fargo, and Goldman Sachs have all reached new 52-week highs this month after passing the test.

Park Kyungmin, a researcher at DB Securities, said, "As U.S. banks’ capital adequacy has improved in this test, dividends and share buybacks are expected to increase through the second half of the year," adding, "The Trump administration’s push for easing capital regulations in the financial sector could also contribute to increased shareholder returns." To date, JPMorgan and Morgan Stanley have each approved share buyback programs worth $50 billion and $20 billion, respectively. Goldman Sachs has also responded to the deregulation trend by significantly raising its dividend per share from the previous $3 level to $4.

Amid the trend of financial deregulation, the Stablecoin Regulation Bill (Genius Act) is also on the verge of passing Congress, drawing market attention to related stocks such as Circle and Robinhood. Notably, Robinhood has attracted media attention by launching tokens that allow European users to trade more than 200 U.S. stocks and ETFs, including the 'M7' (Magnificent 7), and by announcing plans to enable trading of unlisted stocks such as OpenAI and SpaceX via tokens.

Kim Ilhyuk, a researcher at KB Securities, said, "Robinhood is moving toward its goal of taking the lead in the cryptocurrency-based on-chain financial market," adding, "If the traditional dollar-based off-chain financial market and the on-chain financial market are connected through stablecoins, the accessibility of the on-chain market will improve, and investment funds from the off-chain market could flow into the on-chain market via stablecoin exchanges." In addition, the 'Trump Account' provision in the OBBBA, which grants $1,000 to newborns, is also expected to provide Robinhood with momentum for acquiring new customers.

The Return of the M7... Will the U.S. Stock Market Continue to Hit Record Highs?

The return of the 'M7' (Magnificent 7), which led last year’s record rally in the U.S. stock market, is also a noteworthy point. The M7 played a key role in the recent recovery of previous highs in the U.S. stock market, and during Trump’s first term, these stocks also saw the steepest upward curves on expectations of tax cuts. If strong earnings from big tech companies are combined with the momentum of tax cuts and interest rate reductions, it is expected to further boost stock prices.

Han Jiyoung, a researcher at Kiwoom Securities, said, "Currently, M7 companies’ stock prices have rebounded more than 20% from the lows seen during the market crash in early April," adding, "Although it is generally accepted that market leadership changes after a crash, AI-related companies within the M7 are expected to retain their leadership positions." While Tesla and Apple are facing noise from Trump- and tariff-related risks, AI stocks are expected to benefit from the U.S.-China hegemony competition.

Although the U.S. stock market is breaking previous highs and trending upward, there are also concerns about the potential side effects of the tax cut plan. Historically, all seven tax cuts passed in the U.S. have led to stock market rallies, but short-term volatility may increase.

Kim Seunghyuk, a researcher at Kiwoom Securities, said, "While it is intuitive to expect concerns over fiscal deficits to rise, the effectiveness of the proposed solutions has yet to be confirmed," adding, "At a time when debt ceiling negotiations are approaching, related uncertainties could put upward pressure on fiscal interest rates and burden the stock market." Although the passage of this tax cut plan is expected to benefit the stock market and industries in the long term, it could serve as a source of volatility in the short term.