Trump's Win and Rate Cut to Benefit Small Businesses: 5 Top Picks

Nalak Das
6 min read

In This Article:

Key Takeaways

  • PBAM, MAX, TCMD, TZOO and SABK all look to make gains with the Trump election and interest rate cuts.

  • Trump's plan for foreign tariffs may prove a boon for small businesses, helping small-cap stocks.

  • Register now to see our 7 Best Stocks for the Next 30 Days report - free today!

The self-proclaimed “tariff man” is back at the helm of the United States of America. On Nov. 5, Donald Trump had a resounding victory to become the nation’s 47th president.

On Nov. 7, the Fed decided to reduce the benchmark lending rate by 25 basis points in its November FOMC meeting. This rate cut follows an aggressive 50 basis-point reduction in the Fed Fund rate in its previous FOMC meeting in September.

These two recent developments should benefit small businesses to a good extent. Here we recommend five small-cap stocks with a favorable Zacks Rank and solid upside potential in the short term. These are - Private Bancorp of America Inc. PBAM, MediaAlpha Inc. MAX, Tactile Systems Technology Inc. TCMD, Travelzoo TZOO and South Atlantic Bancshares Inc. SABK.

Trump Tariff to Boost Small Businesses

Since the onset of the COVID-19 pandemic in March 2020, small businesses have suffered a lot. During the pandemic, the main concern was demand, as social distancing resulted in a slowdown in U.S. consumer spending, which hurt this segment. The global breakdown of supply-chain systems and the shortage of manpower have affected these companies the most.

Donald Trump’s implementation of tariffs on foreign products is primarily aimed at strengthening U.S. industries by forcing companies to bring back jobs to the country. Small businesses have no geographical diversification and depend on U.S. consumers.

Imposition of tariffs on foreign products, especially those used as inputs to final products will make cheaper imported goods (particularly Chinese inputs) more costly. This will help indigenous small businesses to achieve a level playing field.

Rate Cut to Benefit Small Businesses

After the pandemic, the major issue for U.S. small businesses was galloping inflation. This space suffered significantly due to a higher interest rate regime. The companies operate on a thin profit margin, and most new businesses take time to achieve profitability.

Small businesses are unable to pass on the total hike in input costs to their final products, taking a toll on their financial condition. Small businesses are generally dependent on cheap sources of credit for their survival. Therefore, a gradual decline in the benchmark interest rate will help this space immensely.

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