Post-Election Update

Tom Lally |

Now that the hot takes and dust have settled from the election, it’s time to evaluate the expected investment implications.  Here are the key themes we’re watching.

Coming In Hot

The US economy, as measured by GDP, has been growing well.  It’s widely anticipated that the Republican sweep will usher in tax cuts for both individuals and companies, along with a push for deregulation.  In the short term, those should all help the economy grow faster and corporate profits accelerate.

Perhaps Too Hot

If economic growth is one side of a coin, inflation is the other.  If the economy grows too much, too quickly, inflation can be the unwelcome side effect.  Unless future tax cuts are also paired with spending cuts, the federal deficit will increase.  As more money is funneled into the economy and financial system, there’s a risk of runaway inflation in the mid- to long-term.  With the 2021-2022 inflation surge finally getting under control, this would likely be bad news for financial markets.

Trade & Tariffs

Trump has threatened to increase tariffs on a variety of goods coming from certain countries.  All else being equal, tariffs make things more expensive, and usually at least some of that higher cost is passed on from companies to people.  That could contribute to inflation for US consumers (see above).  It could also lead to retaliatory tariffs from other countries, harming US companies that sell overseas.  It remains to be seen how much the tariff threat is real and how much it’s just a negotiating tactic, but this tool is not one without risks.

While we will continue to monitor these themes and the markets in general, please do not hesitate to contact us at any time.

The author of this article is Tom Lally, CFP®, Financial Planner at Rope Financial.

Disclosures
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Rope Financial are separate entities.
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