As we look ahead to the factors poised to shape financial markets next year, the economic policies under the incoming Trump administration emerge as a dominant theme.
Tariffs and Corporate Tax Reductions
President-elect Donald Trump has pledged tariffs and tax cuts aimed at bolstering the American economy. His proposals include imposing tariffs of 10% or higher on all imports, with even steeper rates targeting Chinese goods. Trump also aims to lower the corporate tax rate from 21% to 15%.
Tax reductions typically boost corporate earnings, a favorable development for S&P 500 shareholders. However, tariffs will increase costs for companies reliant on imported goods. Siebert's CIO forecasts rising expenses across industries such as automotive, consumer electronics, machinery, agriculture, construction, infrastructure, and retail.
Higher costs are often passed to consumers in the form of price increases, potentially dampening consumer spending. Conversely, DWS Group CIO, suggests that the benefits of tax cuts might be offset by the inflationary impact of tariffs on costs.
Deregulation
Deregulation stands out as another significant focus of the president-elect's agenda.
Clayton Gardner, co-founder and CEO of Titan Global Capital, highlights that reduced regulatory constraints are likely to benefit sectors such as investment banking, cryptocurrency platforms, brokerage firms, and asset management. These industries could experience enhanced "pricing flexibility" and a reduction in bureaucratic obstacles. Additionally, Gardner points out that mining and resource extraction companies operating within the U.S. are positioned to capitalize on "expanded production opportunities."
David Bianco emphasizes that the combination of deregulation and tax cuts is expected to bolster stock performance across technology, energy-intensive industries, and utilities, potentially driving growth in these sectors.
Economic reforms promise to have a significant impact on corporate finance and markets in general. But monetary policy and the impact of technology remains an equally important factor - we'll talk about it further.