It hasn't even been a week since Donald Trump was declared the winner of the 2024 presidential election, and investors have high hopes for the president-elect's second term in the White House. All three major stock indexes and the price of bitcoin all hit record highs on Monday, and the dollar surged.
While some experts are predicting that Trump's second term will bring an economic boom to the U.S., others are warning that the president's agenda will have a varying impact depending on industries.
Eric Stein, the head investor at major asset manager Voya Investment Management, says there will be winners and losers resulting from Trump's various policies:
Stein says the permanent extension of Trump's 2017 tax cuts and a lower corporate tax rate as the president-elect has proposed are likely to spur growth (and inflation), benefiting stocks while pressuring bonds as long-term yields rise.
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Stein says threats of universal 10-20% tariffs may be a negotiating ploy to expand U.S. access to foreign markets, but higher tariffs on China are likely and Congress could revoke its most-favored-nation status, shifting supply chains and increasing inflation pressures. Voya estimates tariffs and tighter immigration controls may reduce GDP by 0.5% in 2025."
"Tariffs are important to watch and I do expect Trump and [potential returning trade chief Robert] Lighthizer will push tariffs, but I expect at least most of them won’t last that long as they are mostly negotiating tools," Stein told FOX Business. "There will likely be some volatility around the tariffs but I expect them to be mostly used as a negotiating tactic."
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Broader executive powers over enforcement will bring a wave of deregulation, potentially boosting economic growth, corporate earnings and small business profits by lowering compliance costs and clearing the path for strategic mergers and acquisitions, Stein argues. He said the downside is the potential for further inflation risk.
"I think the biggest impact will be the deregulation push, which will unleash animal spirits and be very positive to drive economic growth," Stein told FOX Business of Trump's overall impact.
Stein says accelerated oil and gas lease sales and immediate drilling permit approvals by the next Trump administration may lift short-term sentiment, but will have little effect on earnings over the next four years.
"Despite Trump’s dismissal of renewables, clean energy remains firmly entrenched with strong state backing and clear economic advantages over thermal," he said.
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Stein believes inflation may have some volatility during the Trump administration but will likely remain close to where it is today, which is to say a little bit above 2% but way down from 9% a few years ago. He says Trump’s supply side deregulation is deflationary and that should help bring inflation down though tariffs are inflationary.
When asked about the potential impact if Trump follows through with an Elon Musk-led commission to slash government spending, Stein said, "This could potentially be transformational."
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"However," he added, "It may be challenging to do everything that gets proposed given various circumstances related to a large government such as ours compounded by outside factors such as the economy and global politics."
