In a post earlier today, I wrote about the proposed reduction in US corporate tax rate by the current administration. Should the rates decline substantially which sectors will be the biggest beneficiaries?. One of the misconception among investors is that the tech sector will be a big winner of a lower tax rate since they have huge cash hoards stashed abroad.  However according to an report at Franklin Templeton, the sectors that are likely to benefit the most are financials, consumer staples and industries.

From the article:

Financials, Consumer Staples, Industrials Likely to Benefit

Potential US tax reforms are likely to have a wide range of impacts on different sectors and companies within the equity market, but ultimately it depends on an individual company’s situation. That said, as we look across sectors, we see some companies more likely to benefit and some less likely to benefit. In our view, financial-oriented companies with higher effective tax rates are among the likely beneficiaries. We also would put consumer discretionary, consumer staples and industrials companies in that category, particularly companies with high domestic production operations and/or a specific export focus. Companies competing with large importers of goods may see a competitive advantage.

Those that may see a less significant benefit include health care and technology companies; in these areas we may actually see an increase in cash or GAAP tax rates,¹ particularly for companies that have been a bit more aggressive with tax-planning strategies and/or the offshoring of a significant component of their operations.

Overall, we think tax reform is likely to be positive for US equities in general. The benefit from lower tax rates is likely split between earnings and cash flow at the corporate level. Combined with the effects of higher spending and possible domestic investment and other stimulus measures, we see the potential for US GDP growth to accelerate between 0.5% and 1.0% over the next several years.

Source: The Sectors Most Likely to Cheer US Tax Reform by Ed Perks, CFA, Franklin Templeton Investments

Since the election, financials and industrials have soared but consumer staples have lagged. So investors may considering adding consumer staples stocks while waiting for lower prices in the other two sectors and then adding stocks selectively.