Capstone's Top Underappreciated Policy Catalysts for 2025

Capstone believes President Trump will use tariffs aggressively, prioritizing tariffs on products imported from China, and will move forward with a 10%-20% universal tariff. These actions threaten import-exposed industries, including energy, autos, tech, retailers, and healthcare. However, we believe President Trump’s protectionist instincts may be tempered by a broader concern for the stock market and retaliatory tariffs from China, resulting in tailored tariffs.

Capstone believes the Trump administration will lean heavily on executive action to implement its energy agenda. Looking at Congress, with slim majorities and a host of priorities outside of energy, we believe Republican lawmakers will shy away from major action on energy. On balance, we believe the result of this dynamic will be a world that is moderately friendlier to fossil fuels.  

Capstone believes the Trump administration will lean heavily on executive action to implement its energy agenda. Looking at Congress, with slim majorities and a host of priorities outside of energy, we believe Republican lawmakers will shy away from major action on energy. On balance, we believe the result of this dynamic will allow renewables to avoid a worst-case scenario.  

Capstone believes that although federal environmental regulations will slow with the incoming Trump administration, regulators will likely not fully roll back Biden-era PFAS rules—a positive for utilities and waste management companies. However, blue states are likely to implement environmental policy aggressively, providing a blueprint for future federal regulation and creating opportunities for environmental consulting companies.

Capstone believes President-elect Trump’s second administration will profoundly impact Europe’s economic and policy outlook. We believe Trump 2.0 will not be like his first term. Given his overwhelming mandate, the next four years will see unprecedented US policy changes, with underappreciated implications for EU trade, environmental, tech, and tax policy, European industry, and the broader EU economy.

Capstone expects the Consumer Financial Protection Bureau (CFPB) to scale back its aggressive rulemaking agenda under the Trump administration in 2025. While the CFPB will continue to enforce the law, the Trump administration is likely to pause pending rules and rescind or initiate rulemakings to roll back ambitious Biden-era rules. Constitutional challenges and efforts to impose direct congressional appropriations face dim prospects.

Capstone expects elevated housing and real estate policy action in 2025, with the Trump administration initiating government-sponsored enterprise (GSE) reform and stepping up pressure on the rental and hotel industry’s use of rent-setting algorithms. We expect recent changes to the commission structure to hurt real estate brokerages. We also expect state-rent protection measures to surge as a response to Republican control on the federal level.

Capstone believes insurers will continue to face more scrutiny over investment strategies, reinsurance practices, and the use of data intelligence tools. Exposure to catastrophe risks and extreme weather will likely prod policymakers to balance strengthening property and casualty markets with affordability goals. Firms active in annuities and title segments stand to benefit from the incoming Trump administration’s deregulatory approach.

Capstone believes the incoming Trump administration will usher in a volatile 2025 for health insurance payors. There are several themes within payors that investors are underappreciating, primarily involving the Affordable Care Act (ACA) subsidy extension, Medicare Advantage’s (MA) tailwinds, and nuanced risks, and the target Medicaid spending and Medicaid managed care organizations (MCOs) have on their back.

Capstone believes 2025 will feature a broadly positive policy backdrop for healthcare providers, with three major themes dominating. We expect a reversal of labor union alignment rules passed by the Biden administration, stepped-up momentum in Congress to resolve the future of the physician fee schedule (PFS), and relative insulation for “core population” services from the potential trickle-down effects of potential Medicaid cuts.

Capstone believes the healthcare impacts of Biden’s Inflation Reduction Act will be felt in 2025, posing underappreciated risk and little recourse for payors, manufacturers, and pharmacies. The Trump Administration will revisit the Most Favored Nations (MFN) pricing model, which would significantly disrupt the pharmaceutical supply chain. However, concerns about the BIOSECURE Act’s impact are overstated, and the bill is unlikely to pass.

Capstone expects the US-China competition to intensify as the incoming Trump administration has made reining in China a cornerstone of its foreign policy. We believe that Trump will build on the first-ever restrictions on US capital to invest abroad, increasing risks for public market investments in Chinese entities. We also believe the US will prepare for a conflict with China by expanding munitions stockpiles.

The AI market will accelerate in 2025 in response to the US government’s efforts to build its AI infrastructure and roll back regulation. Amid this momentum, several dynamics will distinguish the winners from the losers. Notably, open-weight model developers like Meta and Mistral.ai will face underappreciated headwinds. In addition, US companies that develop AI models on behalf of EU customers face risks as enforcement of the EU AI Act begins later in the year.

Capstone believes the executive and judicial branches will step up scrutiny of Big Tech platforms in 2025, including Alphabet Inc.’s Google, ByteDance Ltd.’s TikTok, and Live Nation Entertainment Inc. However, Congress will play a less significant role than it did during the Biden administration as key conservatives leave Congress to join the Trump White House. We also expect the refusal-to-deal (RTD) doctrine to play a pivotal role in litigation.

We believe the crypto industry will benefit from regulatory clarity and increased investment established by a pro-crypto Securities and Exchange Commission (SEC). We anticipate a decrease in enforcement actions by the SEC will allow for an expansion of crypto ETFs and other products. These changes will create tailwinds for the crypto industry and spur more competition for existing crypto platforms as large banks look to get in the game.

We believe the Trump administration will take a more aggressive cyber-security posture and gut the Cybersecurity and Infrastructure Security Agency (CISA)—moves that will escalate global cybersecurity tension. We also expect Congress to push for cyber regulation harmonization and modernization, creating tailwinds for cybersecurity vendors and consultants and headwinds for telecom, pipelines, and utility critical infrastructure.

Capstone believes Trump will pursue his illegal immigration agenda immediately after taking office, leading to underappreciated labor availability woes and wage pressure challenges for the construction and services industries. However, reforms to the specialty occupation (H1-B) visa program will notably widen the foreign talent pool for Big Tech companies.

Capstone believes that a second Trump administration will intensify the US’s “tough on China” technology policy approach and expand the scope of controlled technologies. These tensions pose underappreciated risks for domestic and foreign semiconductor manufacturers, Japanese automakers, e-commerce platforms, and large-scale M&A deals.

Capstone believes a Republican-led Federal Communications Commission (FCC) will take an “America first” stance in the satellite race against China by boosting new, large US-based satellite constellations such as SpaceX’s Starlink and Amazon’s (AMZN) Project Kuiper. The FCC is set to implement a waiver by Q1 2025 and simplify the licensing procedure, change spectrum-sharing rules, and expand broadband capital subsidy programs.

Capstone believes a Republican-led Federal Communications Commission (FCC) will aggressively pursue business-friendly regulatory reforms and adopt an accommodative stance towards mergers and acquisitions. This is expected to result in major policy changes for the telecommunications industry, creating underappreciated opportunities for broadband providers, wireless companies, and Elon Musk’s Starlink.

Capstone assigns a 90% probability that US regulators will approve the transaction SES/Intelsat deal by December 19, 2025, under the Trump administration, up from the 80% probability that we assigned under a potential Democratic administration.