A New Presidential Transition

As President Trump officially takes office again, we take a look at the economy he is inheriting, and how his first moves could impact it.

Current Economic Snapshot

President Trump was inaugurated a second time this week, and he will preside over an economy that is relatively strong, despite the political narrative we heard during election season.

Consumer Spending and Economic Resilience

Yes, the cumulative effect of inflation is a heavy weight on consumers, but consumer spending is broadly holding up, which accounts for up to three-fourths of the U.S. economy.

Economic Growth Projections

LPL Chief Economist Jeffrey Roach tells us incomes remained supportive of current spending patterns as data from the 4th quarter of 2024 comes in. LPL expects Q4 annualized growth to come in at 2.5%, which is down from 3.1% in Q3, but still robust.

Consumer Confidence Indicator

Consumer optimism reached its highest level since before the COVID-19 pandemic.

Anticipated Presidential Agenda

At the time of this recording, the expectation is that the new President will sign a barrage of executive orders in his first week.

Immigration Policy Priorities

LPL helps us out in identifying the most likely. The Macro Strategy team writes that Immigration will likely be the most prominent as Trump looks to seal the southern border. Further actions may include a more restrictive asylum process, reinstating travel bans, and deportation of individuals suspected of being associated with drug cartels or criminal gangs. Some economists believe this could impact the homebuilding industry, where illegal immigrants make up a large portion of the workforce.

Tariff Strategy

The President is threatening to impose new tariffs on countries like China, Mexico, and Canada, among others. Some economists believe the higher tariffs will simply be passed on by companies in the form of higher prices, which will stoke inflation. How the President might implement tariffs, and really the pace at which he might do that, will determine the impact on the economy. It is expected that he will act gradually, as to limit impact on the markets.

Global Tariff Context

First Trust Advisors points out that the U.S. has the lowest average tariff percentage currently of any of its top 10 trade partners at 3.4%. India has the highest at 18.3%.

Energy Policy Outlook

Trump vowed in his inaugural address to sign orders promoting domestic oil production. He is also expected to reverse President Biden’s climate policies, including the embargo on liquified natural gas exports, and policies promoting green energy and electric cars.

Market Reaction and Economic Implications

It’s hard to say how these moves will immediately impact the economy but the markets seem particularly enthusiastic about deregulation and possible corporate tax cuts. Deregulation would likely support financial services and some segments of oil and gas, while helping to foster merger and acquisition activity.

Final Caveat

Much of Trump’s agenda will require Congressional approval. So, time will tell if what gets done, will impact the economy.

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