Article

What Trump’s win may mean for the markets and economy

6 November 2024
Kristina Hooper
Kristina Hooper
Chief Global Market Strategist, Invesco Ltd
Andy Blocker
Andy Blocker
Global Head of Public Policy
What Trump’s win may mean for the markets and economy
Key takeaways
Five key policies
1

Trade and investment, tax, immigration, and fiscal policies, and his approach to the Fed may impact some investments.

Asset classes to watch
2

Tax-advantaged investments, REITs, the US dollar, and select industries and companies may be influenced to some extent. 

What matters more
3

Monetary policy is likely to have greater influence on stocks than any legislation or executive action.

Now that the election is over, and Donald Trump is set to take office on January 20, 2025, investors are wondering what his policies may mean for the markets and economy. Based on pledges made on the campaign trail, here are five key things we’ll be watching for from the President-elect.

We believe, however, that investors often overstate the impact that the federal government has on broad financial markets. In fact, monetary policy is likely to have greater influence on markets in the next few years than any forthcoming legislation or executive action. Ultimately, policymaking is about setting priorities. No administration gets everything they want, nor do markets necessarily respond to the political initiatives in the “obvious” way.

Policy platform
 Market implications
  • Pursue “America First” agenda

  • Implement universal baseline tariff of 10%

  • Increase tariffs on Chinese goods to “more than 60%”

  • Impose 100% tariff on cars made outside the US

  • Use blanket tariffs to penalize companies that outsource US jobs
  • Policy uncertainty. A period of trade policy uncertainty could potentially weigh on markets until greater clarity emerges.

  • Strong US dollar. Despite the latest reporting that Trump is considering forcing a weaker dollar to encourage exports, the US dollar would likely strengthen amid expectations that policies would result in stronger US growth compared to the rest of the world.

  • Protection for select industries. Tariffs on European and Chinese goods could benefit US companies in certain industries such as steel, aluminum, and paper.
Policy platform
 Market implications
  • Cut funding for the Internal Revenue Service

  • Cut corporate tax rate to 15% for companies that produce their goods in the US

  • Remove tax from Social Security benefits  

  • Work with Congress to make individual tax cuts for those above and below $400,000 income level and estate tax thresholds permanent

  • Could extend the TCJA special 20% tax deduction for pass-through businesses that’s set to expire

  • Withdraw from or renegotiate the international tax agreement

  • Remove tax on tipped income and on overtime pay
  • Reduced demand for tax-advantaged investment vehicles because historically, there has been lower demand for them during periods of lower taxes.

  • Real estate investment trusts (REITs) are likely to benefit if the special 20% pass-through tax deduction is extended, that would allow REIT shareholders to deduct 20% of taxable REIT dividend income they receive, not including dividends that qualify for capital gains rates.
Policy platform
 Market implications
  • Implement a sweeping mass deportation program to remove all illegal immigrants from US

  • Issue executive orders to place conditions on immigration

  • Resume the building of wall at US southern border

  • End automatic citizenship for children of undocumented immigrants born in US

  • Partner with local law enforcement on “catch and release” strategy
  • Negative impact to certain industries that utilize immigrants for labor such as hospitality, health care, manufacturing, construction, and agriculture, which could face challenges like higher labor costs and lower profit margins

  • Potential demographic and growth challenges given the relatively low birth rate for US citizens
Policy platform
 Market implications
  • Could resume dovish pressure/rhetoric toward the Federal Open Market Committee

  • Potential plans to make the Fed less independent

  • Uncertain whether Fed Chairman Jerome Powell would be reappointed when his term expires in 2026

  • May propose non-traditional candidates for Fed Chairman and Governors
  • Challenges to Fed independence raises risks to markets and inflation expectations could potentially reaccelerate, resulting in higher interest rates and lower equity valuations.
Policy platform
 Market implications
  • Rein in government spending on foreign aid, clean energy and climate mitigation funds, and immigration

  • Protect Social Security and Medicare reforms from benefit cuts

  • Extend tax cuts implemented in first administration

  • Establish “Department of Efficiency” under Elon Musk with goal of cutting $2 trillion in spending
  • Level of fiscal discipline will depend on whether there’s a split government; if there’s a one-party sweep, we’re likely to see higher fiscal deficits

 

Related insights

  • Investment risks

    The value of investments and any income will fluctuate. This may partly be the result of exchange rate fluctuations. Investors may not get back the full amount invested.

    Important information

    Data as at 06 November 2024.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

    Views and opinions are based on current market conditions and are subject to change. 

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