Donald Trump was the first president in modern U.S. history to take office without holding a prior public office or serving in the military. This non-traditional path to the White House came with a distinctly corporate approach to economic and fiscal policy, one that both excited and unnerved investors in equal measure.
Key Points
- Trump’s focus on tax cuts, deregulation, and tariffs boosted domestic industries but disrupted global trade, benefiting sectors like energy, infrastructure, and defense.
- Rising national debt and aggressive fiscal policies under Trump could fuel short-term market gains but increase long-term risks and volatility.
- Trump’s pivot toward crypto and rapid-fire policy changes could create opportunities in digital assets and industries favored by his administration.
A Business-Oriented White House
From the moment he entered the political arena, Donald Trump presented himself as a businessman whose background in real estate and media would translate into a savvy dealmaking approach in Washington. During his first presidency (2017–2021), that style permeated discussions on tax reform, international trade, and budget negotiations.
Trump’s administration sought to pair substantial corporate tax cuts with extensive deregulation to stimulate economic growth. These policies were credited by some for boosting corporate earnings, although detractors questioned whether they would deliver long-term, sustainable gains.
Investors observing a potential second Trump presidency, or even the memory of the first, note the lasting influence of Trump’s worldview on business and trade.
The belief that renegotiating trade deals and encouraging domestic manufacturing could strengthen the U.S. economy shaped Trump’s policies. For instance, the 2018 tariffs on steel and aluminum briefly boosted certain domestic industries but also invited retaliatory tariffs from major trade partners, complicating global supply chains.
Future implementations or expansions of such policies under a renewed Trump mandate could create opportunities in industries he deems “strategic,” particularly manufacturing, steel, aluminum, and energy.
According to the U.S. Census Bureau, exports of goods and services from the United States reached nearly $2.5 trillion by 2019, but tariff adjustments under the Trump administration reshuffled major trade partnerships.
During the late 2010s, manufacturing employment rose by approximately 500,000 jobs according to the Bureau of Labor Statistics, partly attributed to Trump’s emphasis on domestic production. Investors who tracked these shifts found that industrial and materials sector ETFs saw fluctuating inflows during the period as markets adjusted to tariff policies.
US Debt Levels and Fiscal Priorities
One of the least discussed topics during election season was the impact of US debt. When Trump first took office in January 2017, the national debt stood around $19.9 trillion. By the time he left in January 2021, that figure had ballooned to nearly $27 trillion and today it sits at $36 trillion.
Part of this rise was fueled by 2020-21 era stimulus, but it also stemmed from tax cuts and mushrooming federal spending. Few would argue that the pace of borrowing is untenable, but supporters counter that the administration’s pro-growth policies will help offset deficits in the long run through higher GDP.
A renewed Trump presidency may double down on this growth-oriented approach, potentially implementing additional tax cuts or infrastructure spending to stimulate economic activity. There is also a lot of talk of an External Revenue Service that tariffs other nations to drum up capital versus an Internal Revenue Service to tax those living within US borders.
In the short term, these measures may boost investor confidence but the long-term cost of servicing higher debt may shape future policy choices, potentially leading to debates on entitlement reform or cuts to federal programs. The tangled web connecting rising debt and interest rates is likely to become more pressing, especially if investors demand higher yields on U.S. Treasuries, as some like Cem Karsan are forecasting by year-end.
Federal Reserve Policy & Inflation Pressures
The President has theoretically no oversight or control over monetary policy but in the last Presidential cycle, Trump was famously outspoken about the Fed’s decisions and often urged lower interest rates to spur economic growth.
A second Trump presidency is likely to renew that pressure and will probably create tension if inflation persists and the Fed seeks to tighten policy. The Fed is between a rock and a hard place in this regard, because lower interest rates are only going to exacerbate a future decline and already the long-end of the curve is signaling that it disagrees with lower rate policy.
Inflation is also a genie that might be out of the box, not least due to increased government spending so if the Fed is forced to raise rates in response, both corporate and consumer borrowing are likely to slow. Stocks as a whole and in particular growth stocks are most likely to feel the brunt of these Fed actions.
During Trump’s last tenure, the federal funds rate ranged from near-zero to 2.5%, and peaked in late 2018 according to Federal Reserve data. If he were to return to office and again criticize rate hikes, expect sharper market swings whenever the Fed signaled policy shifts.
The Stock Market’s Reaction
The stock market under Trump’s first term initially surged, buoyed by tax cuts and optimism about deregulation. Indeed, the Dow Jones Industrial Average climbed from roughly 19,800 at Trump’s 2017 inauguration to over 29,000 by early 2020.
If the last merri-go-round is a good benchmark for what’s to come, expect the Trump presidency to be accompanied by sharp policy announcements, whether that’s in the form of tariff threats on social media to sudden changes in stance on international alliances.
The volatility on the horizon is precisely what short-term traders can capitalize upon, however long-term investors need to stay focused more on policies that move the needle over time, such as corporate tax cuts or infrastructure bills.
Cyclical industries, like energy, financials, and industrials, are more likely to benefit from tax and regulatory rollbacks under Trump. Tech companies are potentially a more risky sector with threats of trade wars impacting supply chains, or antitrust considerations.
Looking to the past, the S&P 500 posted an annualized return of about 15% between January 2017 and January 2021, according to FactSet but volatility spiked many times following announcements about trade tariffs. For instance, in May 2019, the Dow dipped more than 6% in a single month when investors had to come to terms with new tariffs on Chinese imports.
Cryptocurrency in the Trump Era
Trump had been vocal about his skepticism toward cryptocurrencies, at one point tweeting that Bitcoin and other digital currencies were “not money” and “based on thin air.”
During his administration, there were no sweeping federal regulations specifically designed to govern digital assets, though the SEC began to increase oversight.
Since then he has completed a full U-turn and indeed launched his own memecoin hours before his inauguration. In anticipation of a much more favorable cryptocurrency policy, Bitcoin and altcoins soared.
The tide shifted tremendously in favor of crypto investors when Blackrock launched its ETF and today, institutions, banks, and even government entities in other nations are exploring blockchain use-cases.
If the administration pivots toward the creation of a digital dollar or harness blockchain for certain government functions, it is likely to lend legitimacy to the technology. Ethereum, Chainlink and Bitcoin all sit as prime contenders to benefit, if the purchases of Trump’s World Liberty are a sign of what’s to come.
The Incoming Administration’s Worldview
It’s well-known that a Trump White House will place the U.S. at the center of all negotiations—be it trade, security, or energy. For investors, the focus needs to now be on Trump administration’s return to imposing tariffs.
So too any renegotiating of agreements, whether with nations or multinational corporations that can have a knock-on effect to impact supply chains needs to be watched like a hawk. If they do occur, expect consumer goods companies to face higher input costs.
Trump’s tendency for rapid-fire policy shifts creates both risks and opportunities, whether benefiting domestic industries on the one hand in infrastructure, defense, or construction or hurting companies heavily reliant on global networks on the other hand.
The president’s personal take on global conflicts and energy independence are also likely to shape commodity prices, particularly if new sanctions, export bans, or strategic reserves come into play.
A Pew Research Center survey indicated that by 2019, key U.S. allies, including Germany and Japan, had begun adjusting certain trade flows in response to tariff threats. U.S. imports from China fell by over $100 billion between 2018 and 2019 alone, according to the U.S. Census Bureau, largely attributed to tariffs and trade disputes.
Navigating the Possible Future
A Trump presidency is most likely to blend an entrepreneurial verve, nationalist trade policies, and a willingness to remake government structures in pursuit of economic objectives.
The most likely outcome is a combination of volatility and short-term opportunities, though longer term the risks are high of U.S. debt levels ballooning under a growth-centered agenda that amplifies pressure on the Federal Reserve’s monetary policy.
Cryptocurrency regulations, particularly a strategic Bitcoin reserve, are likely to be transformative for holders of digital assets if the speculation comes to fruition.
A key to investing success going forward will be how nimbly investors respond to rapid policy shifts and how swiftly they identify industries favored by a Trump administration.
Energy, manufacturing, defense, and infrastructure are top of the list of those likely to catch a tailwind from federal initiatives while global supply chain disruptions might hinder multinational players. Ultimately, the Trump brand of politics that is direct, deal-focused, and controversy-laden is likely to generate market swings that reward those who follow policy developments closely.
Looking in the rearview mirror, GDP growth averaged around 2.5% in the first three years of Trump’s initial term, only to drop sharply in 2020 according to the U.S. Bureau of Economic Analysis.
Unemployment dipped to a 50-year low of 3.5% in late 2019 according to the Bureau of Labor Statistics but the Federal Reserve’s balance sheet ballooned past $7 trillion by mid-2020 as monetary intervention scaled.
The takeaway is that market conditions during a Trump presidency may be as much about global events and the Fed’s actions as they are about the administration’s policies themselves.
A Trump-led White House can be interpreted to mean aggressive fiscal maneuvers and potential standoffs with the Federal Reserve. Each policy decision is likely to spark investment opportunities for investors who pay close attention to changing market currents.
Whether you choose to embrace the volatility, hedge against it, or simply observe from the sidelines, expect a Trump presidency to leave a distinct mark on the investing world and ripple through all sectors from defense to crypto and beyond.