A Change at 1600 Pennsylvania Avenue

For months, Americans have been inundated with campaign ads, speeches, and promises from both candidates, Trump and Harris, as well as numerous supporters and proxies from both campaigns. This week, the results of early voting, absentee ballots, and conventional ballots cast on the first Tuesday in November were tallied, and Donald Trump is set to take office on January 20th as the 47th president of the United States.

As Americans prepare for the change in power and the effects it may have on themselves, their families, and their places of employment, we will be hard at work analyzing how it may impact the economy, the investment environment, and client tax bills. Below are a few topics we will be monitoring closely over the next several weeks and months:

•    Tariffs, retaliatory tariffs, foreign policy, and the strength of the U.S. dollar.  As global investors changes to the international landscape can make certain asset classes more or less appealing. As such, capital market assumptions may need to be adjusted, and changes to portfolios may need to be implemented at some point in the future.  

•    The Federal Reserve and interest rates.  Earlier this year, the Federal Reserve began cutting interest rates. As of the time of this writing, short-term interest rates have so far been cut by 0.75%. We will be monitoring monetary policy and the shape of the yield curve (interest rates on bonds with different maturities at a specific point in time) to determine where to invest the safest portion of client portfolios.

•    Fiscal spending, receipts, and deficit levels.  With the federal debt nearing $36 trillion, we will be monitoring the need for further borrowing and how that will affect the interest rates on government borrowings and other securities in the marketplace.    

•    Regulatory changes.  Changes in the regulatory environment could lead to substantial savings for companies operating in heavily regulated industries. In contrast, companies operating in industries that have benefited from subsidies or policy-driven competitive advantages may suffer. In addition, a reduction in regulation, or simply a reduction in regulatory uncertainty, could increase capital spending by corporations and provide a short-term boost to the economy.

•    Corporate income tax.  Given the election results, we are unlikely to see an increase in the corporate tax rate.  

•    Individual income taxes.  Many provisions of the 2017 Tax Cuts and Jobs Act will sunset at the end of 2025. We will be closely monitoring tax legislation to determine what effect this may have on future tax brackets, how different sources of income may be taxed, and what implications there may be for estate planning.

The changes in leadership and policy will undoubtedly bring both opportunities and challenges. By closely monitoring the evolving landscape and making informed decisions, we will work hard to help our clients navigate these uncertain times and reach their financial goals.