Which Donald Trump Will Govern the Second Time Around?
Investors are eagerly awaiting the return of Businessman Trump, known for his support of deregulation, tax cuts, low interest rates, energy abundance, and stable markets. However, they may also encounter Populist Trump, advocating for migrant worker deportations, rigorous import taxation, and protectionist policies that could harm growth, increase costs, and fuel inflation.
Then there's Madman Trump, the unpredictable leader who has threatened to invade Greenland, annex Canada, and reignite global tensions. Can these seemingly contradictory personas coexist within a single presidency? With Donald Trump, anything is possible.
The primary challenge for investors and businesses during his second term will be discerning which of Trump's impulses will have the greatest impact on the economy.
Navigating Trump's Policy Landscape
To provide clarity, we present a comprehensive guide covering key issues that concern investors, offering insights and predictions on potential outcomes.
Trump's second term begins with a strong economic foundation, characterized by robust job creation and inflation below the 9% peak experienced in 2022. While many economists predict that Trump's protectionist agenda will harm the economy and exacerbate inflation, his tendency to moderate his threats suggests that his tariff and deportation plans may not be as severe as feared.
Trump will also face challenges absent from his first term. Although inflation has subsided, it remains a concern. The growing national debt could limit Trump's ability to enact tax cuts or other debt-increasing measures. Additionally, international conflicts, including the Russia-Ukraine war and China's military buildup, have created a more precarious global environment.
Policy Modifications and Resistance
Trump intends to modify or reverse several of Biden's policies on energy, cryptocurrency, healthcare, immigration, consumer protection, and technology. In some cases, he may make immediate changes, while in others, he will encounter Congressional resistance and legal challenges. The recent TikTok controversy exemplifies the potential for early high-profile conflicts.
Market reactions to Trump's policies will shape his agenda in both predictable and unexpected ways. The influence of his close confidant, Elon Musk, is likely to play a significant role.
Musk, the CEO of Tesla, will head an efficiency commission tasked with overhauling the federal government. While his ambitious plans have Trump's support, he is likely to face opposition from the entrenched bureaucracy. This battle promises to be an entertaining sideshow in 2025, with the potential to become a major event once the commission's recommendations are released in 2026.