President Donald Trump’s immigration policies would likely have devastating effects on corporate America’s growth and profits, but investors have yet to be fazed, largely because they don’t believe it will continue to the full extent of his plans.
It’s a gamble that would be costly to lose, strategists and analysts say, with mass deportations likely to disrupt industries as varied as hospitality and leisure services, and agriculture, food production, food manufacturing and construction. labor intensive.
While the Trump administration declared a national emergency at the southern border and began sending deportees back to Central America, it has so far stuck to mass deportations and large-scale labor raids.
There were signs of relief from Wall Street not unlike the broad advance in the S&P 500 spurred by softer-than-expected moves in rates. Restaurant operator Yum! Brands Inc. rebounded 2.4% in Trump’s first week, paring its January loss. Building materials maker Owens Corning rose 3%, while hotel and resort operators suffered smaller declines.
The bet boils down to confidence in Trump’s use of the stock market as a scorecard and that he will avoid policies that hamper economic growth and weigh on stock prices. In short, traders and investors don’t believe Trump is really going even though the policy has broad voter support.
“People forget very quickly that there is often a lot more talk than actual execution, especially with the midterm elections in 20 months,” said Todd Ahlsten, chief investment officer at Parnassus Investments. “So we don’t want to overdraw what could be a short-term blip and mess it up.”
In addition to Trump’s penchant for trumping broad policies, investors are betting on a more tamed approach to the deportation point to the likelihood that many of the actions will be tested in court and face funding challenges as he tries to reduce federal spending. .
And while deporting one million to two million people per year is feasible, according to estimates by Jefferies LLC strategists, that is a far cry from quickly eliminating the estimated 11 million undocumented people living in the United States. .
The risk to his followers is immense. Trump’s full proposals would set off shock waves throughout the economy, according to strategists, economists and Wall Street professionals. Inflation would rise and labor industries, such as agriculture and construction, would have difficulty finding workers. Returning the country’s entire undocumented immigrant population will reduce US gross domestic product by 8%, a Bloomberg Economics analysis found.
“If we’re talking about a rapid deportation of 10 million people, I think it’s fair to say that while the impact wouldn’t be on the same scale as the pandemic era, it could be close,” said Mark Malek, chief investment officer at Siebert. “All of this could have a painful impact on jobs, inflation and the economy.”
Disruption risk
Investors concerned about Trump’s deportation plans will focus on Shaers of companies that own hotel properties and fast-food restaurants, along with producers of food and construction products, all industries that rely on low-skilled labor.
There are signs of stress in the hospitality sector. Host to Hotels & Resorts Inc., Park Hotels & Resorts Inc., Trump’s first week during Trump’s first week. in office.
They, along with meat processors like Tyson Foods Inc., will get a squeeze from higher labor costs, especially in California, Texas and Florida. Jefferies strategists found that the loss of about one million production workers would lead to five months of disruptions and a roughly 8% increase in wages in the meat processing industry.
Tyson shares have plunged on concerns about bird flu, although shares have advanced 1.5% over the past two sessions.
Restaurant operators in the S&P 500, facing the prospect of higher wages and food costs if deportations increase, jumped nearly 2% in the week after stumbling to start 2025. Investors will focus on earnings comments from Jack In the Box Inc., McDonald’s Corp., Restaurant Brands International Inc., Wendy’s Co., Domino’s Pizza Inc. and Papa John’s International Inc. to assess the level of concern among executives.
Companies exposed to construction: from home improvement retailers Home Depot Inc. and Lowe’s Cos Inc., to service and materials providers such as Topbuild Corp., Installed Building Products Inc., Owens Corning, Beacon Roofing Supply Inc. and Builders FirstSource Inc. could also see disruptions. In markets like Texas, California and Florida, more than 45% of construction workers are immigrants, according to Jefferies data.
Big Tech won’t be spared either, as the new administration also plans to restrict work visas for highly skilled foreigners through the H-1B program. Information technology outsourcing firm Cognizant Technology Solutions Corp. and Major Tech Behemoths Amazon.com Inc., Meta Platforms Inc., Alphabet Inc., Microsoft Corp. and IBM have significant exposure to the VISA program, Jefferies Strategists said. However, they expect only a minimal impact to profitability unless there are “wholesale changes” to the H-1B visa.
Trump’s plans on immigration come at a time when investors are still grappling with the delicate balance between a resilient economy and stubborn inflation. The S&P 500’s latest rally was triggered by a cooler-than-expected inflation print in mid-January.
Anything that derails this progress will have a domino effect on equity prices and bond yields.
“Eventually, the issue is how much of a supply shock this is to the labor market,” said Alicia Levine, director of equity and investment strategy at BNY Wealth. “It can eventually be more inflationary than tariffs because it is immediate.”
Despite these risks, investors are largely positioning for immigration issues with the same strategy they are using for tariffs. The idea is to focus on what is actually done, not to be influenced by what Trump threatens, and to closely monitor the sectors that are bound to be caught in the crosshairs.
“I think actual immigration actions will be modest,” said Brad Conger, chief investment officer at Hirtle Callaghan. “I can’t imagine a situation where deportation and other moves will be so severe that I will have to change my investments.”
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