Why Activist Investors Are Excited for Four Years of Trump

As Donald Trump enters another term as U.S. president, Wall Street is abuzz with speculation on how his administration’s policies will influence the market. Activist investors, in particular, are optimistic about the potential for increased opportunities under an economic landscape shaped by Trump’s familiar blend of tax reforms, deregulation, and pro-business rhetoric.

This enthusiasm is not without reason. Activist investing—a strategy where investors acquire significant stakes in companies to influence their decisions—thrives in environments where regulatory frameworks and economic policies create fertile ground for corporate changes. Over the last decade, activist investing has grown into a formidable force. According to data from the S&P Global Market Intelligence, there were 949 activist campaigns launched globally in just the first half of 2024With the Trump administration expected to lower corporate taxes and scale back regulations, activists see a window of opportunity to reshape corporate strategies and unlock value for shareholders.

One of the hallmarks of Trump’s presidency is his emphasis on reducing regulatory constraints. During his first term, Trump’s administration rolled back over 100 federal regulations, targeting industries such as energy, financial services, and manufacturing. Activists expect a continuation of this trend, which could facilitate corporate restructurings and strategic initiatives that often attract activist campaigns.

Reduced regulatory hurdles make mergers, acquisitions, and spin-offs more viable. Activist investors, often the drivers of such events, leverage these opportunities to push for changes that boost shareholder returns. For example, prominent activist hedge funds have used regulatory changes in the past to advocate for large-scale mergers and operational improvements in companies like AT&T and Twitter.

The activism boom is tightly intertwined with the rise of event-driven hedge funds, which focus on corporate events such as takeovers, bankruptcies, and spin-offs. In 2024, an event-driven hedge fund index demonstrated strong performance, returning 8.59% for the year. These funds and correlated indexes thrive on volatility and capitalize on corporate events where pricing inefficiencies or strategic mismanagement create value gaps.

While event-driven and activist strategies often overlap, they are not the same. Event-driven hedge funds capitalize on transactional opportunities, such as mergers or restructurings, whereas activist investors take an ownership role to influence a company’s strategic direction. Analysts note that the two strategies frequently complement each other, with activism driving corporate changes and event-driven funds profiting from the market volatility created by those changes.

Under Trump’s administration, the potential for increased corporate activity could serve as a boon for these funds. A more permissive antitrust stance, for instance, could pave the way for activist investors to push for consolidations in sectors ranging from technology to healthcare. Event-driven strategies allow investors to profit from anticipated stock price movements triggered by such events, underscoring their synergy with activist campaigns.

Another anticipated policy focus is tax reform. In Trump’s first term, corporate tax rates were slashed from 35% to 21%, significantly boosting after-tax corporate earnings and shareholder value. Activists leveraged this windfall to advocate for share buybacks and dividend increases. A similar reform in the current term could once again expand corporate profit margins, creating fresh opportunities for activists to campaign for capital redistribution or operational reinvestments.

Take the case of Carl Icahn, one of Wall Street’s most prolific activist investors. In the past, Icahn’s campaigns often urged companies to return excess cash to shareholders. During the previous tax reform cycle, his fund benefited from enhanced liquidity in companies targeted for activism. Many expect Icahn and others to replicate this strategy, particularly in industries with significant tax exposure.

The administration's stance on antitrust enforcement is another key area of focus. Analysts highlight that Trump's leniency toward mergers, as seen during his first term, is expected to continue, encouraging activist investors to push for consolidations. This approach sharply contrasts with the stricter antitrust scrutiny under the previous Biden administration, which frequently sought to block high-profile mergers to prevent market concentration. While Trump's pro-M&A stance is seen as a green light for corporate dealmaking, critics warn that unchecked mergers could lead to monopolistic behaviors, potentially harming consumers and stifling innovation. Nonetheless, activists view this environment as a net positive. Firms like Pershing Square Capital Management have previously lobbied for large-scale mergers, knowing regulatory pushback would be minimal. If Trump’s antitrust policies mirror his first term, activists will likely continue to advocate for bold corporate combinations.

Another four years of Trump has infused the activist investor community with a renewed sense of purpose. From tax reforms to deregulation, the administration’s policies could create an environment ripe for shareholder activism. Activist hedge funds have consistently demonstrated their potential to deliver strong returns, particularly during periods of market opportunity. For example, in December 2023, the HFRI Event-Driven (Total) Index, which tracks strategies including activism, recorded its highest gains since November 2020, underscoring the potential effectiveness of these approaches. With a pro-business president at the helm, activist investors are well-positioned to seize opportunities and drive substantial value creation in the evolving economic landscape.

Critics, however, caution against unbridled enthusiasm. While Trump’s policies may align with activist goals, they could exacerbate economic inequality or lead to unchecked corporate power.

Ultimately, the coming years could solidify activist investing as a driving force in reshaping corporate America. For Wall Street, the prospect of an administration that fosters corporate activity is a clear signal that opportunity is knocking.

Sources:

1. Annual Review of Shareholder activism 2023. (n.d.).
2. Record number of activist investors joined shareholder rebellion in 2024 | reuters. (n.d.-c).
3. Brian Scheid, I. L. (2024, March 6). Investor activism surges as companies react to proposed changes. S&P Global Homepage.
4. HFRI indices December 2023 performance notes. HFR. (2024, April 2).
5. Investor activism campaigns set torrid pace in H1 2024. S&P Global Market Intelligence. (n.d.).
6. Event driven hedge fund index. (n.d.).
7. Rossman, J., Jacobs, J., & Pitcher, Q. (2025, January 21). 2024 review of shareholder activism. The Harvard Law School Forum on Corporate Governance.