It seems like all our clients want to talk about lately is president elect Donald Trump. Some believe that he is incredibly good for the market and his policies will drive the market higher in 2025. Others are convinced he will destroy the economy and the market is getting set up for a correction. We believe that Donald Trump policies are both bullish and bearish and, depending on which policies get implemented, they will have different effects on the market. Let’s dig a little deeper.

 

Trump’s bullish policies:

• He is definitely pro-market
• Deregulation (good for oil and gas and financials)
• Tax cuts, and extensions of existing tax cuts.
• Pro-crypto and A.I.

 

When it comes to the markets, Donald Trump is certainly pro-market. Some may argue he focuses too much on how the market is doing. His deregulation will most likely be a tailwind for the oil and gas as well as financials. His tax cuts will likely benefit the market but not have the same economic effect as they did in 2017; many will just be extensions of current policy set to expire. His pro-crypto and A.I. policy will be significant for both sectors.

 

Trump’s bearish policies:

• 15-20 million deportations
• Slow-down on new immigration
• Large fiscal deficits will continue
• Tariffs

 

There is no doubt that mass deportations and slowing immigration will be a drag on the economy. The massive immigration policy over the past few years has certainly been a tail wind for the Biden administration. Persistently large deficits will likely be the hardest issue for the new administration to overcome (especially given the potential tax cuts that are on the table). DOGE may help this a bit, but the math is significant, and tariffs alone will not make up for it. Especially considering that tariffs will likely make inflation more persistent. Just look what the bond market is telling us!

 

We believe some of these policies will be watered down in their final forms. Such as the tariffs, which we believe are being used as a bargaining tool. One obvious thing to expect in 2025 is volatility. Trump has a tendency to surprise us with policy decisions being reported on social media. Not something the market is used to!

 

I have also included a note from our CIBC Economics team entitled “In Canadian politics, do all roads lead to the same place?”

 

As always, if you have any questions, please feel free to give us a call.

 

Have a great weekend.

 

Milan