Wall Street’s Big Hope Is Trump Pulls His Punches on Immigration
Esha Dey
5 min read
(Bloomberg) -- President Donald Trump’s immigration policies would likely have devastating effects on Corporate America’s growth and earnings, but investors haven’t been perturbed yet — largely because they don’t believe he’ll follow through on the full extent of his plans.
It’s a gamble that would be costly to lose, strategists and analysts say, with mass deportations likely upending industries as varied as service-heavy hospitality and leisure, and labor-intensive agriculture, food production, manufacturing and construction.
While the Trump administration declared a national emergency at the southern border and started sending deportees back to Central America, it has so far held off on mass deportations and large-scale workplace raids.
There were signs of relief of Wall Street not dissimilar to the broad advance in the S&P 500 spurred by softer-than-expected moves on tariffs. Restaurant operator Yum! Brands Inc. rallied 2.4% in Trump’s first week, paring its January loss. Building materials maker Owens Corning jumped 3%, while hotel and resort operators suffered minor declines.
The bet distills to relying on Trump’s use of the stock market as his scorecard and that he’ll avoid policies that hamper economic growth and weigh on share prices. In short, traders and investors don’t think Trump will actually go all the way despite the policy having broad support from voters.
“People forget very quickly that often there is a lot more talk than actual execution, especially with mid-term elections coming up in 20 months,” said Todd Ahlsten, chief investment officer for Parnassus Investments. “So we do not want to over-extrapolate what could be a short-term blip and get it wrong.”
Aside from Trump’s penchant to overpromise on broad policies, investors betting on a tamer approach to deportation point to the likelihood that many of the actions will be tested in the courts and face funding challenges as he tries to cut federal spending.
And while deporting one million to two million people per year is feasible, according to estimates by Jefferies LLC strategists, that’s a far cry from rapidly removing the 11 million undocumented people estimated to live in the US.
The risk to his following through is immense. Trump’s full proposals would trigger shockwaves throughout the economy, according to strategists, economists and Wall Street pros. Inflation would soar and labor-intensive industries such as agriculture and construction would struggle to find workers. Returning the country’s entire population of undocumented immigrants will reduce America’s gross domestic product by 8%, an analysis from Bloomberg Economics found.
“If we are talking about a rapid deportation of 10 million people, I think it is fair to say that while the impact would not be on the same scale as the pandemic era, it could be close,” said Mark Malek, chief investment officer at Siebert. “This all could have a painful impact on employment, inflation, and the economy.”
Disruption Risk
Investors worried about the Trump deportation plans will be focusing on shaers of companies that own hotel properties and fast-food restaurants, along with producers of food and building products — all industries that rely on low-skill labor.
There are signs of stress in the hospitality sector. Host Hotels & Resorts Inc., Park Hotels & Resorts Inc., Xenia Hotels & Resorts Inc., Sunstone Hotel Investors Inc. and Ryman Hospitality Properties Inc. have all stumbled so far this year, and saw only a little relief during Trump’s first week in office.
They, along with meat processors like Tyson Foods Inc., wil get a squeeze from higher labor costs, especially 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 slumped on worries about avian flu, though the stock advanced 1.5% in 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 be focused on earnings commentary from the likes of 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 gauge the level of concern among executives.
Companies exposed to construction — from home-improvement retailers Home Depot Inc. and Lowe’s Cos Inc., to services and materials providers like TopBuild Corp., Installed Building Products Inc., Owens Corning, Beacon Roofing Supply Inc. and Builders FirstSource Inc. — could see disruptions as well. In markets such as Texas, California and Florida, over 45% of construction workers are immigrants, according to data from Jefferies.
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 all 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 wrestling with the delicate balance between a resilient economy and a 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 is this for the labor market,” said Alicia Levine, head of investment strategy and equities at BNY Wealth. “It may eventually be more inflationary than tariffs because it’s immediate.”
Despite these risks, investors are largely positioning for immigration issues with the same strategy they’re using for tariffs. The idea is to focus on what actually gets done, not be swayed by what Trump threatens, and closely monitor the sectors that are bound to get caught in the crosshairs.
“I think the actual immigration actions will be modest,” said Brad Conger, chief investment officer at Hirtle Callaghan. “I cannot imagine a situation where the deportation and other moves will be so severe that I will have to change my investments.”
