Many professional investors are excited about Trump 2.0. They like Trump’s plans to cut taxes and are enthusiastic about the prospect of deregulation. That said, the good ship Trump and the investors trying to run may run into some hot water — caused, in part, by crossing their own lines.
Trump’s Agenda
Donald Trump’s plans, based on campaign promises, are broad, varied, and sometimes contradictory. Some of the main objectives include:
- Using prices in almost every country in the world.
- He extended the tax cuts he signed into law during his first administration.
- Reduce the size of government.
- Mass evictions.
- Increasing the credit limit.
The Economy Trump Legacy
An exit poll by CNN found that 35% of respondents said the economy was “not so good” and 33% said the economy was “poor”. However, many economists view the economy as doing well. They pointed down inflation to 2.7%; down unemployment at 4.2%; and powerful GDP of 3.1%in the third part.
“The US economy is in very good shape – it has a strong growth trend,” said Douglas Holtz-Eakin, an economist and president of the American Action Forum, a center-right think tank. “All of these risks are policy risks.”
The disconnect between economists’ statistics and consumer sentiment is pricing. They are always very stubborn and probably will be for a long time.
Prices
Trump said he would lower consumer prices. The numbers tell a different story. Economic analysisand a report from the National Retail Federation see his plans backfire.
Taxes are an important part of the president’s agenda. You want 10-20% off prices on almost all foreign goods. In addition, he proposed 25% higher tariffs in Canada; 25-100% in Mexico, and values as high as 60% in China.
Trump argues that the tariffs will help American manufacturing and compensate for lost government revenue because of his proposal to extend the tax cuts. However, the numbers don’t add up.
More than taxes, Trump a mass deportation plan would increase food prices. This is because many undocumented migrants work in agriculture and food processing.
Mass deportations will reduce revenue from taxes paid by undocumented workers.
Taxes
Lawmakers on both sides of the aisle don’t want to take tax savings away from their fellow Americans. That’s especially true for those Americans who are major campaign donors. Therefore, there is likely to be widespread support in Congress to extend the tax cuts signed into law in 2017.
The residual effect may be a major obstacle to continued tax cuts. Adding the cuts would add $4.6 trillion to the deficitaccording to the nonpartisan Congressional Budget Office (CBO).
For individuals, extending the cuts means the rich will get richer and the middle class will get less.
Households making $450,00 or more would receive more than 45% of the benefits of the law extension, according to the report. Urban-Brookings Tax Policy Center. The top 1% of households will save about $70,000, or 3.2% of their income. At the same time, middle-income families will save about $1,000 or 1.3% of their income.
Health care
The only tax cuts Trump is likely to allow to expire are found in the 2021 American Recovery Act. The Biden-era law will expire at the end of 2025. Provides tax credits that reduce out-of-pocket costs for Affordable Care Act (ACA) health insurance enrollees.
It’s over 20 million Americans will see their health care costs rise by nearly $700 a yearwhen these tax credits expire, according to KFF, a nonprofit health policy group.
I American College of Physicians (ACP)the American Academy of Family Physicians, and the American Medical Association have all called for an extension of the tax plan.
“Before the tax credits were extended to include middle-income earners, many individuals and families who did not qualify for Medicaid were being priced out of the bill,” said David Pugach.
ACP vice president for government affairs and public policy.
social Security
In addition to extending the income tax cuts, the president-elect has proposed eliminating the federal Social Security tax, tips, and overtime pay. However, the revenue from those taxes is used to fund Social Security and other safety net programs.
Because of this, Trump’s plan will accelerate the payment of Social Security, according to the report Tax Policy Center (TPC). In turn, that will lead to a decrease in employee benefits.
Social Security reserves will run out of money by 2031 according to the Committee on a Responsible Government Budget. As a result, subscriber benefits will drop by 33% by 2035.
Significantly, those with the least to lose will lose the most. Families earning $32,000 or less do not pay much of their income tax. Therefore, they will not benefit from the tax reduction, according to TPC.
Stock Markets
Wall Street is filled (figuratively) with bodies of analysts, advisors, fund managers, and analysts who try to predict the markets. Which is a difficult task in times of calm and stability. In the next treatment, the body weight may increase significantly.
Many analysts see the economy continuing to grow, albeit at a slower pace, and the stock market rising with that growth. However, the wild cards in that favorable scenario are the next administration’s policy actions and the actions of the Federal Reserve.
The biggest mistake investors make in times of turmoil or uncertainty is panic selling.
Vanguard, a global investment management company, looked at how clients behaved during the biggest financial disruption in recent history: the COVID-19 pandemic.
Less than 1% of Vanguard clients sold stocks during the February 19 to May 31, 2020 analysis period. During that time, the S&P 500 fell 34% and then rebounded 36%.
“Eighty-six percent of money panics are locked in losses over a three-and-a-half-month period,” said Vanguard. “Furthermore, they missed the rebound, meaning almost all of them ended up with returns that were lower than their pre-pandemic portfolio returns.”
Congressional assistance
Implementing Trump’s plans will, in most cases, require Congressional approval. Great Republican help was readily available. However, i Recently there has been a dust-up about government funding it shows that in the future that support may not be easy to find.
Republican House Speaker Mike Johnson’s team, negotiating with House Democratic leadership, reached a budget deal on December 17. The next day Trump and Elon Musk called for the deal to be scrapped. Musk, who funded a quarter of a billion dollars in Trump’s campaign, even threatened to sponsor the main opponents of the House members who voted for the bill.
The plan worked and the funding bill was defeated.
Trump then proposed a new spending bill and added a proposal to raise or freeze the debt ceiling. However, it was defeated when 38 Republicans joined with Democrats to oppose it. After that the spending bill was finally passed.
Trump’s willingness to pull out of the deal at the last minute and the resurgence of backbones by some Republicans make the course ahead uncertain.
Perhaps if we look at the next year or the next four years, we should be guided by the words of Rep. Steve Womack, R-Atk. Who advises, “Stay tuned. Buckle up. Buckle up,”
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