Donald Trump will "substantially" reduce taxes for businesses, the president-elect tweeted Sunday, and one sector in particular could benefit most if such taxes were cut.
Consumer discretionary stocks have the second-highest effective tax rate (at 31.4 percent) of all the S&P 500 sectors, according to S&P Global data. And within consumer discretionary, retailers get hit the hardest, said Erin Gibbs, equity chief investment officer at S&P Global. Specialty retail and multiline retail, two groupings within the sector, see two of the highest effective tax rates, at 37.4 percent and 34.3 percent, respectively.
By contrast, the S&P 500 has an average effective tax rate of 26.6 percent.
"If we see a decrease, particularly on the federal level, it's those retailers that could really benefit, and we could look at a much better hit for the next two years," Gibbs said Monday on CNBC's "Trading Nation."
Gibbs is bullish on retail at these levels, even without the prospect of tax cuts for the group. Fundamentally, next year looks positive for the group, given a forecasted 15 percent growth in earnings.
"It could finally be a good year for retail stocks," she said.
The S&P retail ETF (XRT), which tracks the performance of retail stocks, has lagged the market by about 14 percent over the last three years, gaining about 8 percent in that time while the market has gained about 22 percent. Top-weighted holdings in the ETF include Office Depot, Children's Place and Cabela's.
A technical analysis of the XRT may indicate a bullish outlook for the group, according to Craig Johnson, senior technical research analyst at Piper Jaffray.
Johnson points out that the XRT has continued to make "higher lows" each time it pulls back, examining a five-year chart of the ETF.
"So you're starting to see some positive influence here in the consumer cyclical stocks," Johnson said Monday on "Trading Nation."
Johnson added, too, that restaurants are another group within the consumer space that could benefit from lower corporate tax rates.
At these levels, Johnson gives retail a "neutral" rating because he and his firm see better returns in basic materials, energy and the technology sectors, "as the reflation trade has been a little bit stronger right now — but there are some good-looking stocks inside of retail, to be fair."