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Post-Election Outlook [VIDEO]
All eyes are on the incoming Trump administration, the transition to a Republican controlled Congress, and the potential impact both will have on the economy and the financial markets.
A Political Comeback Not Seen Since 1892
President-elect, Donald Trump, is returning to office after a previous presidential election loss - a rare political comeback not seen since Grover Cleveland in 1892. Trump’s first term, combined with campaign messaging and recent cabinet picks, provides a plausible roadmap for how this administration’s policies may unfold.
Deregulation, Tax Cuts & Tariffs
Equity and bonds markets have already moved in anticipation of deregulation, tax cuts and protectionist trade policies. Deregulation has historically been viewed as a positive for American businesses and stock prices, as it reduces cost, enhances efficiency, and creates opportunities for market expansion.
The extension of the 2017 tax cuts would likely increase the already large federal budget deficit; however, tariffs and spending cuts might offset some portion of the expected shortfalls. Additionally, the budget deficit will need to be financed through the national debt, potentially leading to higher interest rates
Tariffs of 10% to 20% on imported goods - with the possibility of higher duties on Chinese products - would likely put upward pressure on prices and inflation.
Complicating Matters...
The Federal Reserve is in the early stages of an interest rate cutting cycle, which may need to be recalibrated in the quest for a “soft landing”.
Bottom Line
The Trump administration’s anticipated policies have the potential to support economic growth, albeit in an environment with higher inflation and elevated interest rates.
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