We’ve received many questions since Donald Trump was elected president with Republican control of Congress regarding the impact the new administration will have on the GSA space and Boyd Watterson’s GSA strategy. Like many, we’ve been watching carefully for signals from the president as to his intentions and the plausibility of enacting some of his proposals. We have identified areas and agencies that have increased risk under the new administration as well as areas that we think will benefit under the new administration.
1) Department of Defense: the Republican Party has historically been hawkish when it comes to the military and we anticipate an increase in defense spending. This may start with a roll-back of sequestration, which would be a boon to the DoD and contractors.
2) Immigration related agencies: these include Immigration & Customs Enforcement (ICE) and Customs & Border Protection (CBP). These two agencies are somewhat intertwined and, given the recent controversial executive orders regarding immigration and the new administration’s rhetoric regarding immigration, we expect to see an increase in funding for these two agencies.
3) Law enforcement agencies: agencies such as the FBI, DEA and US Marshals and others within the Department of Homeland Security (DHS) are anticipated to receive additional funding from the new administration. Trump & the Republicans controlling congress generally favor a “tough on crime” approach and we anticipate these agencies to benefit.
1) Environment-related agencies: We anticipate funding to be cut for the Environmental Protection Agency as well as Fish & Wildlife. Additionally, areas within DOE, DOJ and State Department dealing with climate change and environment are expected to take hits. The new administration’s attitude towards environmental regulation is much more Laissez-Faire than the Obama administration.
2) Department of Energy: Reports have surfaced that the administration plans to cut back heavily within the Department of Energy. In particular, the Office of Electricity, Office of Energy Efficiency and Renewable Energy and the Office of Fossil Energy are said to be on the chopping block.
3) Department of Commerce: The Commerce Department is also rumored to be due for cuts, primarily to areas seen by the Republicans as corporate subsidies. These include the Minority Business Development Agency, the Economic Development Administration, the International Trade Administration and the Manufacturing Extension Partnership.
Remains to be seen:
1) IRS: - The IRS has been a target of Republican leaders for cuts in recent years and has shrunk by 30 percent in total headcount since 2011. That led us to initially believe that its funding would continue to be negatively impacted by the recent elections. However, Steve Mnuchin, the Trump administration’s pick for Secretary of the Treasury, indicated in his testimony before Congress during the vetting process that he would like to grow the IRS, calling it understaffed, and should be exempt from the Trump administration’s hiring freeze. Therefore, we have not yet taken a position on what’s next for the IRS and will continue to monitor the situation.
Boyd Watterson has strategically tailored its GSA strategy to the areas that appear to benefit most from the new administration. We have long seen these areas as likely growth areas that may be accelerated in the Trump administration. On the flip side, the strategy seeks to lessen exposure to the areas that are likely to see cuts.
The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.