Post Election Views

It is now December 3, 2024.  Another Detroit Lions victory over the Chicago Bears and Michigan victory over Ohio State in the books.  It’s also post 2024 Presidential Election to End All Elections.  Heading into November’s election, I repeatedly wrote about the fact that while pundits always create fear, nothing seems to really change in the world.  So, what should we expect now that Donald Trump was elected President with a Republican Congress?

First, to sound like a broken record, we have seen this before.  When Trump was elected President in 2016, he had a Republican House and Senate.  He promised to shake things up, and immediately took on Obama Care and tax cuts.  While tax rates were cut for the first time since the mid 1980’s (taxes have changed many times, but the brackets very seldom go down), the elimination of Obama Care never materialized.  The S&P 500 rose from 2195 in November of 2016 to 2911 in August of 2108 – a 33% increase.  By December of 2019, the S&P was at 3226 (47% gain).  Tax cuts and lower regulations were having a positive effect on the economy.  However, not all was wonderful.  Tariff battles created issues in sectors of the economy such as agriculture and manufacturing.  Most of the tariffs that were imposed by Trump were kept in place by the Biden Administration.  While the overall economic conditions were strong during the first Trump Administration, they could have been better if not for the effects of the tariffs.  The pandemic created the chaos that drove the economy down, and I won’t go into the politics of that situation.

As Ronald Reagan once said, “here we go again.”  President-elect Trump is threatening to levy 25% tariffs on both Canada and Mexico as well as an additional 10% tariff on all Chinese imports.  He is insistent that he will lower taxes, reduce inflation, eliminate government waste, and end the wars in Ukraine and the Middle East.  Let’s be honest, this is a lot to do in January.  Even with Elon Musk helping, some of this may not get completely done.

So, if we assume a similar strategic plan as his first term, we can assume that regulations will not increase even if the bureaucrats in DC fight to keep current ones in place.  Inflation is already easing, and while interest rates are not declining quickly, they are moving in a downward direction.  All of this is positive news for the business community and the markets.  Does this mean that we should expect a jump in the S&P 500 so we should buy in?  Well, the S&P 500 is up 26.54% YTD as of the writing of this blog (9% since election day) so if you have been sitting on the sidelines in cash you may have already missed a little of the ride. 

Just like Obama Care stymied Trump, so will his tax promises.  The 2017 tax cuts are still in place, and he’s promised to eliminate taxes on tips and social security.  If those pledges are honored, the best we could hope for would probably be an extension of the 2017 tax cuts, not new reductions.  While Canada and Mexico have already started negotiating with Trump, China has not.  A new trade war could dampen any short term gains we have seen in the market.

What is the plan, then?  We will invest in quality companies in sectors least likely to be affected by the whims of politicians.  We will continue to look for opportunities that help clients achieve their financial goals.  And we won’t over-react to situations we have all seen before.  Except for the Lions – we have never seen an 11-1 record.  Merry Christmas and Happy New Year!

Written by Sean Budlong, CFP®, AAMS, Chief Executive Officer, Majestic Financial, Financial Consultant, RJFS
 
*Disclosures: Any opinions are those of Sean Budlong and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.