According to Wells Fargo analysts, U.S. rail stocks could see a boost if former President Donald Trump returns to the White House. The bank suggests that Trump’s economic and trade policies, which previously benefited the transportation sector, could lead to significant growth for U.S. rails once again.
The analysts highlight that during his previous administration, Trump’s policies such as deregulation, lower corporate taxes, increased domestic energy production, and incentivized industrial activity were favorable for transport stocks.
“Trump’s economic policies were largely beneficial for transport stocks during his previous administration, with stocks rising over 100% and outperforming the S&P by 35 percentage points,” the analysts noted.
Wells Fargo believes that similar policies in a potential second Trump term could provide strong support for U.S. rails, truckers, and intermodal operators. The potential for greater deregulation and domestic energy independence could stimulate economic growth by boosting industrial production, construction, housing, and manufacturing.
The report also indicates a preference for transport stocks under a potential Trump administration, with U.S. rails at the forefront, followed by truckers and intermodal operators. However, the analysts point out that forwarders and Parcel may not benefit as much, while Canadian rails could see mixed results.
While Wells Fargo sees Candidate Trump’s policies as mostly positive for the transport sector, they also recognize potential challenges such as proposed Chinese tariffs, increased M&A scrutiny, and rail legislation proposed by Senator Vance.
Additionally, the analysts mention that lower interest rate expectations following a recent CPI report are boosting transport sentiment. They believe that potential Fed rate cuts could stimulate economic activity in sectors like home building, automotive production, and industrial activity, thereby supporting freight demand and asset values.
With Trump leading early U.S. election polls and gaining momentum after the June 27 debate and a failed assassination attempt, investor interest in his economic and trade policies has increased. This has resulted in a 5% rise in transportation stocks since the debate.