What you need to know about your finances under Trump
n the months leading up to the 2016 presidential election, America saw a great deal of uncertainty. Voters wondered what a Trump presidency might look like – many people didn’t even think he had a realistic chance of winning the election. In fact, opinion polls gave Hillary Clinton up to a 99 percent chance of winning, according to Pew Research Center’s November 9, 2016 article, “Why 2016 election polls missed their mark.”
With President Trump officially in office, you may still feel that same sense of uncertainty. Based on conversations I have had with my clients, I see that many people are particularly concerned about the economic impact of the new administration. We saw the market rally in the days following the election – the Dow surged more than 1,400 points between the election and the year’s end. However, no one can predict how the market will continue to react, but if he stays true to his campaign promises, we can anticipate some clear areas of growth in the coming years.
Small Caps
According to the National Small Business Association’s (NSBA) 2017 Small Business Regulations Survey, “70 percent of small firms say that new regulations have a very or somewhat significant impact on their plans to grow or expand their business.” In addition, more than 50 percent of small businesses did not hire new employees because of “regulatory burdens.”
Small business owners have a lot to gain this year, as President Trump has communicated that he will decrease regulations and move forward with tax cuts. According to UBS’s 1Q2017 Investor Watch report, “The Revived Investor,” many business owners plan to grow their business under the Trump administration. The survey found that 41 percent of business owners plan to invest more in business and 30 percent plan to increase hiring now that Trump is in office. What’s more, the National Federation of Independent Businesses reported that optimism among small businesses is at its highest since 20093, and I believe that if President Trump follows through with deregulation, they will be in a position to grow these next few years.
Financials
In the weeks following the election, financials accounted for more than half of the S&P 500 gains. The president will continue to focus on decreasing regulations for businesses, and he is expected to repeal a portion of the Dodd-Frank Act, which would roll back some regulations on financial institutions. According to a Nov. 10, 2016, article in The Wall Street Journal, “Donald Trump’s Transition Team: We Will ‘Dismantle’ DoddFrank,” he plans to propose new policies that will lead to economic growth and job creation in the industry through regulatory exemptions, decreased government oversight and more. A bill could be passed out of a House committee as early as February or March, though the timeline could be pushed due to other policy priorities, according to UBS’s January 6, 2017 Special Washington Update. I believe we may also see an additional boost in financials if interest rates continue to rise in the coming years.
Infrastructure
President Trump has mentioned a massive infrastructure spending package at $1 trillion over ten years. While actual spending is likely to be much more modest, we can anticipate that US infrastructure-related companies will perform well over the next several years as Trump acts on these promises. The Special Washington Update notes that President Trump will likely submit a budget proposal in the second quarter of 2017, which will include his plans for government spending in the next year. We can expect more details to arise later this year, as this spending package likely won’t be a priority for the president until late 2017, according to UBS’s POTUS 45 CIO Wealth Management Research.
President Trump will be busy as he acts on so many of his campaign promises, such as border security and energy reform. While America still doesn’t know what to expect from the new administration, details are starting to emerge about his plans and we are getting a bit more clarity into what he will actually do – and how the economy is likely to react.
Many investors feel confident about the market – in fact, according to data from The Revived Investor, more than half of Pennsylvania investors are looking for new investment opportunities and 37 percent are likely to increase stock market investments. No matter your political beliefs or how you feel about the economic impacts of this new administration, I continue to advise that my clients rebalance their portfolio and stay true to their financial plan as a way to achieve their long-term financial goals, regardless of what happens in Washington.