Small Cap Sunday: Trump Vs Biden
Welcome back to another Small Cap Sunday. Today we’re focusing on the contrast between the Biden and Trump administrations on small cap stocks, plus we’ll take a look at how each has affected the S&P 500 and cannabis stocks in particular.
Small-cap stocks have faced challenges over the last four years, attributed to Biden’s policies emphasizing increased regulation, higher taxes, and clean energy initiatives. Stricter environmental regulations have raised compliance costs, and the push towards clean energy has diverted investments from traditional industries. Additionally, the increase in the corporate tax rate from 21% to 28% has disproportionately affected small businesses, limiting their ability to reinvest and grow. Recovery from the COVID-19 pandemic has also been uneven, with smaller companies struggling to keep pace with larger firms.
But In contrast, the S&P 500 has flourished, achieving a 37.4% gain in Biden’s first year—the best one-year return since 1945. Key drivers include massive stimulus packages, vaccine rollouts, and broader economic recovery. Large-cap tech companies such as Apple, Microsoft, and Amazon have particularly benefited from increased demand for digital services. Infrastructure and renewable energy investments have also bolstered the index’s growth, highlighting a stark disparity between large and small companies.
A new Trump administration could shift the landscape for small-cap stocks. Pro-business policies like tax cuts, deregulation, and protective tariffs may benefit small companies by reducing operational costs and fostering a more favorable business environment. Cannabis stocks may also see significant gains under a Trump administration. During his previous term, state-level cannabis legalization increased, and a return could push for federal medical marijuana legalization and improved banking access for the industry. Reduced regulatory burdens and potential tax incentives could provide cannabis companies with the capital needed to scale operations, innovate, and expand into new markets.
Tune in for the whole breakdown and come visit us on social to share your thoughts. What do you think we’ll see in the stock market in 2025 with the new administration?
