Stocks soared this week on the news that Donald Trump was elected as the 47th President of the United States. Republicans also retook the Senate and will most likely hold a majority in the House of Representatives. Markets rallied on expectations that Republican dominance will mean lower taxes and reduced regulation, resulting in higher growth. The dollar also rose as foreign investors increased their bets that Trump 2.0 will be bullish for the US economy and US assets. Here are a few key policy positions and an initial take on market implications.
1. Taxes
Most Republican leaders have clearly stated their intent to extend the 2017 Tax Cuts and Jobs Act, which was scheduled to sunset at the end of 2025. The extension would keep existing, lower tax rates in place for individuals and businesses. Trump also floated the ideas of ‘no tax on tips’ and ‘no tax on Social Security’ on the campaign trail. We will see if these ideas are implemented into law in the coming months.
2. Energy
On the campaign trail Trump made it clear that he intends to lower energy costs to stimulate the economy and reduce inflation. As a result, energy companies were some of the biggest gainers this week.
3. Healthcare
Conversely, pharmaceutical companies were down this week on the prospect of higher regulation in that industry. Trump’s ally Bobby Kennedy has made clear his intent to eliminate the cozy relationship and potential conflicts of interest between the FDA and big pharmaceutical companies. Pfizer was one of the biggest market losers for the week – down 4.88%.
4. Tariffs
While lacking specifics, Trump has also made clear that he intends to enact tariffs on imported goods. International markets were mixed on the news of Trumps election, a combination of higher expected growth and uncertainty about how tariffs could impact the global economy. US Stocks are likely to outperform global stocks as lower regulation, taxes, and energy costs incentivize US manufacturing.
5. Geopolitics
Gold fell for the week as uncertainty surrounding the US election was settled. It may also indicate hope that Trump may be able to resolve the conflicts in Ukraine conflict and Middle East.
We will certainly keep you informed as more details emerge. In the meantime, the market appears to be cheering.
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