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President Donald Trump’s economic agenda is reshaping the stock market creating clear winners and losers, according to Morgan Stanley.
Lisa Shalett, the chief investment officer of Morgan Stanley’s wealth management division, said in a recent podcast that the combined impact of Trump’s sweeping tariffs and the 2017 tax reform bill is splitting the market into distinct camps.
“As the effects of the tax reform bill and global tariff implementation continue to work through the economy, we’re seeing a new series of structural divides emerge,” Shalett said.
Here are the key market rifts Shalett and Morgan Stanley are watching and how investors should position themselves.
1. Consumer-Facing Companies vs. B2B Firms
Companies that sell directly to consumers are especially vulnerable to signs of economic strain and may face headwinds in the months ahead.
According to Shalett, tariffs could weaken household purchasing power, as companies are likely to pass on import costs by raising prices on everyday goods. This comes at a time when many Americans are already stretched thin falling behind on credit card and auto loan payments, and grappling with rising costs.
Meanwhile, the job market has started to flash warning signs. Payroll figures for May and June were revised sharply lower, and July job growth missed expectations raising the risk of slower consumer spending ahead.
By contrast, business-to-business companies are somewhat shielded from direct consumer trends. Their revenues are often less tied to household finances and more to corporate budgets, which are more insulated at least in the short term from consumer slowdowns.
2. Multinational Exporters vs. Domestic Importers
Shalett also highlighted another emerging divide between multinational exporters and firms more exposed to imports and domestic supply chains.
Export-oriented companies, especially those outside of consumer sectors, are better positioned to weather the trade war, she said. These firms face fewer barriers when shipping goods abroad and they’re benefiting from a weaker U.S. dollar, which makes their products more competitive internationally.
Many multinational exporters are also capital-intensive and invest heavily in R&D. That puts them in a favorable position under Trump’s tax policy, which includes incentives for domestic research and development spending. The “One Big Beautiful Bill,” as Trump dubbed it, created significant tax advantages for companies reinvesting in their U.S.-based operations.
“With this new structural division emerging,” Shalett said, “global stock selection is more important now than ever.”
What Should Investors Do Now?
Shalett outlined several investment themes Morgan Stanley believes will perform well in this new market environment:
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Multinational non-consumer exporters: These companies continue to benefit from currency tailwinds and favorable tax treatment.
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Select sectors like tech, financials, industrials, energy, and healthcare: Firms in these areas could see earnings and cash flow surprises thanks to provisions in the tax bill.
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Avoid overhyped stocks: Shalett cautioned against investing in crowded trades or speculative names that have already priced in significant growth.
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Diversify with international stocks, commodities, and energy infrastructure: These asset classes can help balance risk in portfolios and hedge against domestic economic shifts.
Rising Caution Across Wall Street
Investor sentiment has grown more cautious in recent weeks as Trump ramps up tariff rhetoric and markets digest a string of weaker-than-expected economic data.
Several major institutions including Goldman Sachs, Evercore ISI, Stifel, Pimco, and HSBC have warned of rising correction risks or advised clients to reassess their current portfolio allocations.
In this shifting landscape, Morgan Stanley is urging investors to stay selective and remain aware of the growing splits within the market. With fiscal policy driving dispersion, careful positioning not broad exposure may prove to be the smartest strategy for the months ahead.