Trump's State Of The Union May Affect Prices For These Particular Stocks

Trump State of the Nation Address
U.S. President Donald Trump delivers remarks to foreign ministers from the Global Coalition (Photo: Reuters)

President Donald Trump's state of the union address contained a lot of promises and a lot of details regarding the direction of several government projects. Trump's words certainly had some weight to it and Wall Street was definitely listening. Prices for certain stocks will react accordingly, as the government continues to push its different agendas under Trump's administration.

The biggest winners from Trump's address will be defense and infrastructure shares. Trump clearly stated during his speech that he is aiming to "rebuild" America. This will be done through a new infrastructure bill that would result in additional investments. Additional spending for the country's infrastructure has always been a part of Trump's platform.

During his campaign, Trump called on the government to approve a US$1.5 trillion budget over a span of 10 years for new infrastructure projects. According to analysts, the biggest winners from Trump's speech would be stocks for companies such as Jacobs Engineering, Fluor Corp, and Vulcan Materials. Although, experts believe that a new big infrastructure-spending bill may run into some obstacles in Congress. To get approval, Trump may need to raise tax rates, which could end up derailing his agenda.

Aside from pushing for more infrastructure projects, Trump also mentioned that he wanted to increase military spending this year. The president boasted a US$716 billion budget for military and defense projects. Trump also mentioned that the United States has already been granted US$100 billion from NATO and its allies, which will be used to "outspend and out-innovate" the country's enemies. The slight increase in the country's military budget will likely result in a boost in stock prices for major defense contractors in the United States. This will likely include a boost in stock prices for companies such as Raytheon and Lockheed Martin, among others.

Potential stocks that may go down in the coming months will include drug or pharmaceutical-related companies. During his speech, Trump expressed his concern over the country's medicine prices. He stated that prices in the United States are much more expensive when compared to other countries. These drugs are basically the same product and more often than not are manufactured in the same location.

Trump called on Congress to immediately pass a law that would promote price transparency and fairness. The president also stated that he wanted drug companies, hospitals, and other medical institutions to fully disclose prices to bring costs down by promoting competition. Trump's administration also previously proposed a ban on backdoor deals made by pharmaceutical companies that gave an unfair advantage to middlemen who would get more access to medicine through Medicare.

If any of the president's requests are granted, pharmaceutical companies may be forced to lower their prices. This will, in turn, lower their bottom line, which will negatively affect stock prices. According to experts, stock prices for companies such as Pfizer, United Health, and Merck, may see a significant drop.

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