President Donald Trump is now closer to its major legislative move and investors have turned extremely bullish on the stock market. This is especially true, as lower tax rates would boost earnings, thereby accelerating dividend and buyback activities.

Per UBS strategists, overall S&P 500 earnings would increase by 6.5% if the corporate tax rate falls to 25% and by 9.5% if the tax rate is cut to 20%. Republicans expect a tax reform deal by Christmas. According to Thomson Reuters data, the larger, multi-national companies in the S&P 500 currently pay a median effective tax rate of 28%.

While most of the sectors would benefit from Trump’s plan, some are set to explode higher than others due to their highest effective tax rate. In fact, this trend has started to materialize with investors rotating into tax-sensitive sectors like retail, financials, telecom, healthcare services and away from the hottest technology stocks.

Retail

Retailers, especially department stores, are the biggest beneficiaries of the tax cut plan as they pay maximum taxes among S&P 500 companies given their large domestic networks. The retail group has an effective tax rate of 35%, per Credit Suisse. Additionally, reduced taxes will provide consumers with extra cash that will lead to higher discretionary spending.

Give huge optimism, VanEck Vectors Retail ETF (RTH – Free Report) hit all-time high of $90.64 following the Senate’s passing of tax reform. This fund provides exposure to the 26 largest retail firms. The product has amassed $59.8 million in its asset base and charges 35 bps in annual fees. RTH gained 1.6% on the day and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Macy’s (M – Free Report) , with an effective tax rate of 25.8%, per the MarketWatch’s Corporate Tax Calculator, jumped 6.7% on the day. Its earnings are expected to grow 9.14% for this fiscal year. The stock has a Zacks ETF Rank #3 and a VGM Score of C.