The election is behind us and the immediate investor reaction to Trump 2.0 was overwhelmingly positive. On the day after the election, the S&P 500 was up 2.5 percent, the Dow Jones Industrial Average was up 3.6%, the NASDAQ Composite gained 2.95%, and the Russell 2000 index of small company stocks surged 5.8%.
During the campaign, the president-elect said that he would prioritize extending those tax cuts and would also like to add more tax relief in the form of excluding certain types of income from taxation, like Social Security benefits, overtime pay and tips. These companies then have to make the decision of whether they would swallow the extra cost or pass it on to consumers. This chain of events is why economists call tariffs a sales tax on consumers.