67 Monroe Avenue, Pittsford, NY 14534 / 9am - 4pm M-F 
The 2024 U.S. presidential election marks a pivotal moment, with President-elect Donald Trump securing a decisive victory alongside a Republican-controlled Senate. This outcome signals the potential for swift and comprehensive policy changes across economic, regulatory, and foreign policy landscapes. With a unified government, the administration is poised to push forward an agenda focused on tax cuts, deregulatory measures, protectionist trade policies, and an assertive stance on global geopolitical issues. This article will explore the projected impacts of these anticipated changes on the U.S. economy and financial markets, providing insights from economists and political analysts.
Economic Policy and Market Reactions
The Republican dominance in the election has removed, or certainly reduced, the political uncertainty that had been weighing on financial markets. With this decisive win, Trump’s administration is expected to drive a pro-growth economic agenda, emphasizing tax cuts and deregulation to stimulate business investment and consumer spending.
Capital Group’s economist Jared Franz projects that the administration’s fiscal package could push real GDP growth to 3%-3.5% in 2025, with inflation potentially rising to 2.5%-3%. This outlook reflects Trump’s intention to cut corporate taxes from 21% to 15%, a measure aimed at boosting business profits and attracting investment back to the U.S. economy. However, there are also potential downsides, including an anticipated rise in the federal deficit and bond yields, as the administration balances stimulus with increased public spending.
Financial markets initially reacted positively to the election results, with the S&P 500 Index hitting new highs. We believe this post-election rally reflects investor confidence in Trump’s business-friendly policies. Interest rates, particularly for long-term bonds, are expected to rise, with the 10-year Treasury yield possibly reaching 4.5%-5% amid a shift toward a reflationary economic stance.
Tax and Trade Policies
Trump’s administration is likely to adopt an aggressive posture regarding trade, particularly toward China. Proposed tariffs of up to 10% on all imports, and up to 60% on Chinese goods, reflect Trump’s commitment to protecting U.S. industries and reshoring manufacturing jobs. This policy direction could lead to short-term gains for domestic industries but may pose risks for multinational companies dependent on global supply chains. The administration’s aim to expand on the 2017 tax cuts, lowering corporate rates and providing personal tax relief, could further fuel economic growth but may exacerbate the national debt.
For industries like aerospace, defense, and small-cap firms, Trump’s pro-growth policies could offer substantial opportunities. However, companies with significant exposure to Chinese trade could face challenges as tariffs increase costs and disrupt established supply lines.
Regulatory Shifts and Sectoral Impacts
The Trump administration is expected to reverse many Biden-era regulations, favoring a business-friendly regulatory environment that promotes domestic energy production, reduces oversight on financial services, and emphasizes traditional energy sources over renewable initiatives. Environmental and sustainable finance initiatives, heavily supported under the previous administration, are likely to come under scrutiny, potentially affecting investments in alternative energy sectors.
Sectors poised to benefit from deregulation include oil and gas, financial services, and industrials. Lower regulatory barriers and support for domestic production could lead to increased output in oil and natural gas, though lower prices per barrel may affect profitability. Similarly, financial firms may benefit from loosened capital requirements and relaxed compliance measures, boosting their earnings potential.
Healthcare is another industry likely to experience significant regulatory adjustments. Proposed deregulation may reduce prices and improve competition but could also challenge the profitability of pharmaceutical companies.
Geopolitical Considerations and Global Relations
President elect Trump’s foreign policy stance may diverge sharply from his predecessor’s, especially in relations with Europe, NATO, and emerging economies. The new administration has indicated that they may demand increased financial contributions from NATO allies and could reassess support for Ukraine, potentially straining U.S.-Europe relations. Trade policy is another area of potential tension, particularly if the administration prioritizes “America First” policies, which could disrupt trade alliances.
Conclusion
The 2024 Republican election victories present both opportunities and challenges for the U.S. economy and financial markets. With a pro-business administration, the potential for growth is evident, but risks associated with higher deficits, trade tensions, and inflationary pressures remain. Investors and businesses will need to navigate this complex landscape, balancing optimism over economic growth with caution around geopolitical risks and regulatory shifts.
LVW’s overall investment strategy remains consistent. While each client’s portfolio is structured according to their risk profile and investment objectives, we generally favor equities over fixed income and U.S. over international stocks. Within fixed income, we focus on inflation protection and shorter maturities. We seek to create value for investors by maintaining a long-term perspective, avoiding reactionary moves to news, and allowing compounding to work its magic. Our approach is designed to minimize excessive trading to reduce capital gains taxes, while employing prudent, disciplined rebalancing. This strategy emphasizes patience and tax efficiency, aiming to maximize long-term, after-tax returns for our clients.
We appreciate the trust you have placed in us and our ability to navigate the ever-shifting climate. If you have any questions or would like to discuss these or any other matters further, please reach out to your LVW advisor.
Sources
Matt Miller, Jared Franz, and Reagan Anderson. Trump’s victory signals major policy shifts ahead. Capital Group, Capital Ideas, November 7, 2024.
David Kelly, Gabriela Santos, and Stephanie Aliaga. A potential Republican sweep sends markets higher, but policy uncertainty looms. JPMorgan Asset Management, On the Minds of Investors, November 7, 2024.
This material is provided by LVW Advisors for general informational and educational purposes only. LVW Advisors is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not constitute an endorsement of LVW Advisors by the SEC nor does it indicate that LVW Advisors has attained a particular level of skill or ability. Investing involves risk, including the potential loss of principal. Past performance may not be indicative of future results, and there can be no assurance that the views and opinions expressed herein will come to pass. No portion of this commentary is to be construed as a solicitation to effect a transaction in securities, or the provision of personalized tax or investment advice.
Certain of the information contained in this report is derived from sources that LVW believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages. Any reference to a market index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. The information in these materials may change at any time and without notice.
