Judging by its performance in the past week, the stock market may be expecting the old economy to have a comeback. But what about the future of the new economy?
In the days following Donald Trump’s stunning triumph, many have noted how old-guard industries like health care and industrials h?ave boomed ?as newer ones have faltered. For example, new-guard companies tracked by Kensho’s Clean Energy Index (KENERGY) are down 1.79 percent as of November 16, while the businesses tracked by the S&P Oil and Gas Exploration and Production Subsector index are up by 3.64 percent.
Trump wants to reinvigorate America, but what happens to those at the forefront of the technology industry, who already thought — politics aside — that they were making America great? What of Elon Musk and his Tesla Motors and SpaceX, ventures that have, respectively, cleared a viable path for cleantech and rejuvenated the U.S. space program? And what of the small, lesser-known companies that are leading the way in the technologies that will shape our future?
Big-name multinationals, in the tech industry or elsewhere, might do well under Trump. They will benefit greatly from the tax repatriation reform that will probably come under the new president, which could bring home at least part of the some $2 trillion sitting in companies’ overseas coffers, at a much-reduced corporate tax rate. (Though it’s important to note, ?as I did in my previous column,? that Hillary Clinton favored the repatriation of foreign-held cash through tax reform too.)
Some speculate that environment-friendly companies may face difficulties because it seems unlikely that Trump will further incentivize green power, as was done during the Obama era with tax credits. The credits currently in place,? ?which were passed by a Republican-controlled Congres.eeare unlikely to be overturned, however. As Republican Senator Charles (Chuck) Grassley ?said in said in August?, if Trump wants to take on wind energy in particular, “he’ll have to get a bill through Congress, and he’ll do it over my dead body.”
Furthermore, the unsteadiness of current trade deals — Trump has said he wants to get rid of standing ones like the North American Free Trade Agreement — may hurt budding companies that seek to buy or sell in overseas markets. It’s nearly certain to harm the operations of Ford and General Motors, which is working to develop an autonomous vehicle, as well as the other carmakers with plants in Mexico.
Renewable energy–related companies that rely on Chinese-made solar panels may be affected negatively by the 45 percent import tariff the president-elect is purportedly considering. The more stringent immigration rules that Trump has promised may also slow progress on the innovative work that companies are doing, given that tech businesses have traditionally drawn human capital from a diversity of locales. ?According to one study,? 51 percent of U.S. unicorns (start-ups valued at more than $1 billion) were founded by immigrants.
Despite these reasons for uneasiness, some forward-thinking subsectors have thrived in the week since Trump’s victory. The companies tracked by the Kensho Drones and Genetic Engineering indexes (KDRONE and KDNA) have increased by 8.92 and 12.59 percent, respectively, as of November 16. This outpaces the performance even of businesses in the traditional biotechnology and aerospace and defense industries, which have collectively returned 6.60 and 5.90 percent. Still, the overall effect on the New Economies — the industries ?that are laying the foundation for the Fourth Industrial Revolution? — has been more measured. Taken together, the industries tracked by Kensho’s ?New Economy indexes? have increased by 5.35 percent in the week following the election.
Many questions remain about the fate of the New Economies and of America as a whole, but we’ll have to wait until Inauguration Day and beyond to learn the answers.
