The prospect of a Trump presidency has led to much debate and speculation about how markets might react. Depending on what policies are eventually passed, there are potential risks and opportunities in both the stock and bond markets. While the market surged immediately following the election, many potential future headwinds may impact returns from economic growth, monetary and fiscal policy, and geopolitical events.
“If we create a composite index of wages , economic growth , and inflation . We then compare that composite index to interest rates. Unsurprisingly, there is a high correlation between economic activity, inflation, and interest rates as rates respond to the drivers of inflation.” continue to divert more tax dollars away from productive investments into the service of debt and social welfare.When put into perspective, one can understand the more significant problem plaguing economic growth. A long look at history clearly shows the negative impact of debt on economic growth.
Furthermore, market predictions hinge on the balance between growth and inflation. While Trump has many policies on his wish list, those policies must be passed by a heavily bipartisan Congress. With only slim majorities to work with, there is a risk of defection on some bills, particularly by theLastly, stocks could rally on tax cuts but might stumble if tariffs weigh heavily on global trade.