President Trump’s upcoming policies are sure to stir things up in the stock market. While the S&P 500 and Nasdaq Composite saw positive movement during his first term, what can we expect this time around? A seasoned economist is breaking it down for us, with insights based on both Trump’s previous term and his 2024 campaign promises.
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Tariffs Could Put a Damper on the Market
According to Jason DeLorenzo, a trusted economist, Trump’s tariffs could have a negative impact on stocks. While his first-term tariffs were based on economic factors, his current approach could hurt the market.
“Trump’s tariffs aren’t economically motivated in the same way this time,” DeLorenzo explains. “For example, he’s considering imposing tariffs on Mexico to address immigration, which isn’t a major economic issue. This could lead to inflation and higher labor costs.”
In simpler terms, Trump’s current tariff strategy is more punitive than practical. While his first-term tariffs aimed to balance trade, his new proposals might create supply chain problems and raise inflation.
The Department of Government Efficiency: Not a Game-Changer
DeLorenzo isn’t overly optimistic about the Department of Government Efficiency (DOGE) either. While its goal to cut the deficit by $1 trillion sounds bold, he believes it won’t make a significant impact.
“Shrinking the deficit sounds good, but it could actually harm the economy and cause higher unemployment,” says DeLorenzo. “In my experience, I doubt they’ll meet their goal.”
Which Sectors Will See Growth?
Trump’s second term could favor certain industries. Based on his plans and actions, these sectors could see the most benefits:
- Financial services: Early on, expect gains from fewer regulations and clearer cryptocurrency rules.
- Cybersecurity: As digital threats grow, cybersecurity companies are likely to perform well.
- Energy: Oil pipeline and shipping companies should thrive as energy bottlenecks ease.
- Commodities: Property REITs and gold holdings will likely do well due to potential inflation policies.
Deportations Could Lead to Stagflation
Trump’s push for mass deportations could impact the economy in surprising ways. DeLorenzo warns that deportations could lead to higher labor costs and a decrease in consumer demand, setting the stage for stagflation.
“Increased deportations could reduce the workforce, especially for low-skilled jobs,” says DeLorenzo. “This would lead to higher labor costs and inflation without economic growth, a situation we call stagflation.”
Trump’s Fed Influence: Potential for Big Gains
Trump has long clashed with the Federal Reserve, pushing for lower interest rates. If he succeeds, this could send stock prices soaring.
“If Trump manages to influence the Fed’s policies, it could have a major impact on the market,” says DeLorenzo.
Wrapping Up: What Can We Expect?
It’s clear that Trump’s second term could bring both challenges and opportunities for the stock market. From tariffs to the Fed, each move will have its own consequences. Keep an eye on the sectors that might benefit and be prepared for some unexpected twists along the way. Stay informed and ready for what’s ahead!
