How Trump’s 2024 Economic Agenda Could Shape Markets and the U.S. Economy?

Trump’s tax plan proposes slashing corporate tax rates from 21% to 15%, aiming to boost profits for major corporations, particularly in sectors like technology and manufacturing. This move could boost corporate earnings of companies, particularly smaller domestic businesses, which would also make them more appealing to investors.

Forecast of Corporate income tax revenues in the United States from 2000 to 2034
(as a percentage of GDP)

Source: Statista

Corporate profits in the United States from the first quarter of 2012 to the first quarter of 2024
(in billion U.S. dollars)

Source: Statista

Investor Considerations: Lower taxes could enhance share buybacks and dividends, raising stock valuations in the short term. However, some analysts warn that reduced tax revenues may widen the fiscal deficit. High government spending alongside lower tax revenue could also increase the national debt.

Benefits to the Working Class: Trump proposes excluding overtime pay, social security benefits, and tips paid to staff from taxes. This would incentivize the working population to work more as it would put more money into their pockets. However, this would further lower the tax revenue earned by the US government.

Trump’s approach to trade, especially his proposed tariffs—of 60% on Chinese imports and between 10% to 20% on other foreign goods—signals a tough stance aimed at promoting American manufacturing and reducing reliance on international supply chains. In his first term, tariffs on steel and aluminum increased domestic demand but also raised input costs across various sectors, leading to price hikes for consumers and businesses.

US Balance of Trade (Value of Export – Value of Import)

Tariffs as a Tool for Protectionism: Trump has the power to implement tariffs directly, making this an immediate area of focus. If imposed, these tariffs could have a ripple effect, raising prices for consumer electronics, automotive products, and other goods dependent on foreign materials. Clayton Gardner, co-CEO of Titan, notes that investors are already bracing for these impacts as a likely outcome.

Economic Consequences: Companies may face higher operating costs, which could be passed to consumers as increased prices, thereby fueling inflation. The Federal Reserve could respond by maintaining high interest rates. This could benefit banks as they would be able to earn higher net interest income. But it could pressure other sectors like retail and automotive.

Global Supply Chains: Luxury and multinational consumer brands with strong Chinese market exposure, such as Apple and Nike, would likely experience some challenges as tariffs erode competitive pricing and demand in foreign markets.

Trump’s energy agenda includes policies that favor the fossil fuel industry. His approach includes relaxing restrictions on oil and gas extraction and promoting energy independence by expanding domestic production. However, this could potentially sideline green energy, an area that has been gaining strong momentum among investors with ESG considerations

Energy Use throughout US History

Energy Sector Implications: Oil and gas stocks jumped following Trump’s election, as investors see potential gains in deregulation. But overproduction could lead to a supply glut, driving down prices and profits.

ESG Investor Sentiment: Increased focus on fossil fuels could result in ESG-focused investors withdrawing capital from traditional energy sectors. For investors, balancing ESG goals with profitability will become a critical consideration in this new energy landscape.

Trump’s foreign policy focuses on placing the interests of America first and potentially redefining international relations between the US and certain other countries. Stringent import tariffs could potentially trigger trade wars and exert pressure on economic and diplomatic relations with other countries.

Investor Concerns: A protectionist foreign policy could limit the growth of U.S.-based multinational corporations dependent on international revenue streams. For instance, strained relationships with trade partners might lead to retaliatory tariffs or restrictions on U.S. goods, hitting sectors like agriculture and manufacturing.