Much like The Terminator, it appears Donald Trump has come back from the political graveyard and won the 2024 U.S. presidential election. Whether or not you agree with Mr. Trump's policy positions, rhetoric, etc., as a financial planner and investment advisor, my job will continue to be serving my clients and their families as they pursue their financial goals.
With that in mind, let me first say it likely serves everyone's best interests that the victory was convincing and quickly discernable. It was clear to me a long, drawn out vote-counting period that dragged on for weeks would have been detrimental to financial markets.
What's unclear, however, is just how likely Trump is to deliver on his campaign promises. What were some of those promises and what do those in the investment world expect from a second Trump term? Here's a (lengthy!) list:
Trump figures to very quickly address the expiring provisions of The Tax Cuts and Jobs Act of 2017. Provisions set to expire in 2026 include the increased standard deduction, lower marginal income tax rates, and increased estate tax exemption. At times, Trump has indicated a willingness to eliminate the cap on state and local tax deductions and further lower the corporate income tax rate.
Eliminating taxes elsewhere - social security, tips, overtime pay - Trump campaigned on eliminating taxes on all of those. Trump has also suggested he might eliminate federal income taxes completely as well as eliminate payroll taxes (which fund Social Security & Medicare).
Making interest paid on car loans fully tax deductible, similar to mortgage interest.
Implementing a tax credit for family caregivers.
Increasing the child tax credit to as much as $5,000 per child.
To pay for this, Trump has suggested he will impose tariffs of 10-200% on foreign goods entering the United States.
Renegotiating (again) trade deals with China, Canada and Mexico.
Lowering prices on things like gas, groceries, and other essentials.
Increasing U.S. oil and gas production.
Creating a government "efficiency" commission, likely to be run by Elon Musk, which will aim to reduce government spending by trillions of dollars.
Renewing an effort to completely repeal the Affordable Care Act.
Reducing regulation in industries ranging from financial services, to healthcare, to the environment. All are promised to see stripped down regulatory bodies, if not the elimination of those regulatory agencies completely.
A resurgent U.S. manufacturing sector - Trump hopes less regulation, less taxes, and the imposition of tariffs on imported foreign goods will reinvigorate a relatively dormant U.S. manufacturing sector.
A more direct role in setting interest rates. While the Federal Reserve has long been considered an independent entity, free from political ties, Trump has suggested the President should have a role in setting interest rates.
A tit-for-tat go-between with foreign governments. It would be foolhardy to think U.S. trade partners will not react to the imposition of tariffs on their goods without applying tariffs of their own to U.S. goods.
Reading through parts of this list, most would agree implementing all of it is probably impossible. Economists and fiscal policy watchers have suggested if Trump were to get everything he promised, many trillions of dollars would be added to the deficit each year. Some of the promises also conflict with recognized reality. For instance, while Trump has long claimed foreign countries pay tariffs, everyone else recognizes those tariffs are paid by U.S. importers (who then pass the costs on to U.S. consumers). And while Trump has suggested the U.S. could simply drill more oil to lower gasoline prices, the reality is the cost to produce a barrel of oil in the United States is more than twice as expensive as it is in other parts of the world. After adding in a profit margin, U.S. oil production would simply not be economically justifiable to oil production firms if the price of a barrel of oil fell much from its current levels. Indeed, falling oil prices would most likely lead to an increase in the dependency of the U.S. to foreign oil production.
All-in-all, most expect a whirlwind first few months of 2025. Expectations are for the federal government to get smaller, but more involved in the economy. The goal will be to attract foreign investment capital amidst the unleashing of a U.S. economy some feel has underperformed for years. Will it happen, and happen without rampant inflation and/or sharply rising interest rates? That remains to be seen.
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