Monday, December 16, 2024

Trump’s Agenda Could be Volatile for Market

Donald Trump won the presidency largely on nostalgia for his economic success in his first term. In 2016, he inherited a recovery from the great recession of 2008 and then accelerated it with a substantial tax cut, jawboning down interest rates and lifting some regulatory burden. The Dow rose 10,000 points from 19,000 shortly after his November 2016 election to more than 29,000 in early 2020 (pre-COVID). But, as Joe Biden ends his term, the Dow has crossed 44,000, a spectacular 14,000 point rise during his four years. And the DOW is the laggard index with the NAZ up 32 percent and the S&P up 28, the second year of double digit increases for both.

Dow Jones Industrial Average

But Trump’s Day One agenda of tariffs, massive deportations and cuts in federal discretionary spending could have significant costs in terms of economic disruption and inflation. Trump, himself, finally admitted that his program could cause prices to rise. In his Sunday, December 8, Meet the Press interview, when asked about possible high consumer prices from his trade penalties, said, “I can’t guarantee anything. I can’t guarantee tomorrow.”

Although corporate leadership, especially in the financial markets, see mostly positive results from Trumps’ agenda, the construction, agriculture, and hospitality industry have all predicted significant impact on their costs from mass deportations of undocumented workers. And most economists still predict a bad effect from more tariffs and the possible trade war they initiate.

The latest consumer price index report is up (2.7%) confirming inflation is not yet tamed and the Federal Reserve faces difficult decisions on keeping the current rate or continuing to lower it. The American economy is entering a volatile 100 days as Trump launches his administration.

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