Elections have consequences. On January 20, 2025, President-elect Donald J. Trump will take the oath of office for the second time. He will be the second U.S. president to Grover Cleveland to win non-consecutive terms as the U.S. leader.
The United States has the world’s leading GDP, and the U.S. President has long held the position of the leader of the “free world.” Markets reflect the economic and geopolitical landscapes. The U.S. leadership role means that foreign and domestic policies will influence the path of least resistance of markets across all asset classes. On January 20, 2025, the U.S. policy path will dramatically shift, with the ramifications rippling across markets.
Tax policy will change
- Tax policy will likely remain intact as the new administration will seek to extend the Trump tax cuts.
- The incoming President has pledged to cut corporate taxes on companies that produce goods and services in the U.S.
- The incoming administration has promised to eliminate tips and on social security taxes.
- On election night, President-elect Trump said, “Promises made, promises kept.”
Foreign policy will change
- The next administration will likely change course on Ukraine, working to end the war, which is entering its third year.
- President Trump has pledged re-establish a hard line policy towards Iran and support Israel.
- The administration will insist that NATO pay a fair share for defense.
- Tariffs will be reciprocal. Relations with China will depend on cooperation on a fair trade policy path.
Energy policy will change
- S. oil and gas production will increase with fewer regulations and support for fossil fuel production and consumption.
- S. oil and gas prices could fall for consumers as the U.S. reduces inflation and becomes energy independent.
- Rising exports could increase revenues and reduce the deficit.
- The U.S. will seek to increase petroleum and LNG exports.
- If inflation declines, interest rates will move lower.
U.S. domestic policy will change
- The administration has pledged to deport undocumented immigrants.
- The federal support for law enforcement will likely increase.
- The incoming administration will be more likely to deal with civil unrest with federal assets.
- The support for “Made in the U.S.” businesses could increase domestic production and domestic employment opportunities.
- Cutting the Federal government agencies would reduce U.S. operating expenditures.
What does it mean for markets?
- The incoming administration will take over with the leading stock market indices at or near record highs.
- Lower interest rates and tax rates will benefit equity markets, perhaps leading to higher highs.
- The geopolitical landscape remains turbulent. Time will tell if the Trump administration’s policies improve relations between the world’s nuclear powers, decreasing or calming the current bifurcation.
- The administration has expressed support for cryptocurrencies. Bitcoin is at a record high above the $100,000 per token level. The history of significant price variance could lead to a correction, but the asset class has become more mainstream.
- Commodities are global assets. The price paths will depend on barriers to trade, the weather, and natural or other world events.
The 2024 election has significant ramifications for markets across all asset classes. Deficit reduction and global peace would likely increase investor confidence and lift stocks. However, the many issues facing the world remain reasons why periodic bouts of volatility could be on the horizon after January 20.