As Donald Trump assumes the mantle of President on January 20, 2025, one sees investors observing financial markets increasingly volatile in their approach to waiting for his administration's policies to trickle down and begin to alter them. While the small-cap stocks have been dismal performers, some indices like S&P 500 and Dow Jones are experiencing gyrations. In the week before the inauguration, the Dow gained about 3.7% and the S&P 500 rose about 2.9%, mainly due to a better-than-expected inflation report that relieved the anxiety over Federal Reserve interest rate hikes.
Mr. Trump is believed to have significant tariff policies in store, which would go live right on his first day. In the wake of it, there could be tariffs between 10% and 20% on imports from major partners like China, Mexico, and Canada. Taxes could add costs for consumers and businesses, which could cut into revenues at many companies in the S&P 500. Other industries--for example, energy and finance--should benefit from expected deregulation; an ironic challenge to technology companies comes from possible regulatory changes and antitrust actions.
The U.S. dollar holds steady near a two-year high as markets await Trump's policies, reflecting investor caution regarding global trade dynamics. Financial markets typically stabilize once new administrations clarify their policy directions. Therefore, the first 100 days of Trump's second term are critical in gauging long-term market trends. In general, although there is hope for some sectors, there remains significant uncertainty over changes in trade policy and economic strategies under Trump's leadership.
