Navigating the Trump-Era Economy: Consumer Resilience and Strategic Entry Points for Investors

The U.S. economy, under the shadow of Trump-era policies, continues to defy conventional recessionary signals. Bank of America CEO Brian Moynihan's recent remarks on consumer behavior and the non-recessionary jobs report offer a nuanced view of this evolving landscape. While the government's employment data showed weakness, Moynihan emphasized that the economy is not on the brink of a downturn. Instead, consumers and businesses are adopting a cautious, forward-looking posture, navigating uncertainties in trade policy, immigration, and deregulation. For investors, this signals a need to recalibrate strategies, balancing optimism with prudence.

Consumer Resilience: A Double-Edged Sword

Moynihan highlighted that consumer spending remains robust, with credit and debit card transactions up 4% year-over-year in Q1 2025. Digital engagement is accelerating, with 65% of Bank of America's sales now occurring online. Zelle payments, a key indicator of transactional confidence, surged to $130 billion in volume for the first quarter—a 23% jump from the same period in 2024. These metrics suggest a consumer base that, while wary of policy-driven disruptions, continues to adapt and spend.

However, this resilience is not without its fragility. The Trump administration's aggressive tariff agenda—targeting autos, steel, aluminum, and pharmaceuticals—has created a ripple effect. Businesses are delaying investments and hiring, awaiting clarity on how these policies will reshape supply chains. For example, the auto industry, which could face 100% tariffs on imported vehicles, is already seeing ripple effects in production planning. This “wait-and-see” approach by corporates could slow broader economic momentum, even as consumer spending holds up.

Bank Sector Preparedness: Capital, Risk, and Regulatory Realignment

The banking sector, meanwhile, is recalibrating its strategies to align with this new reality. Banks are leveraging lower capital requirements under the re-proposed Basel III Endgame rules to optimize balance sheets. Institutions like JPMorgan Chase and Citigroup have initiated share buybacks, signaling confidence in their ability to withstand near-term volatility. For regional banks, the focus is on credit risk transfer (CRT) mechanisms, which allow them to offload portions of their loan portfolios to private credit firms. This not only reduces risk-weighted assets but also frees up capital for higher-margin activities.

Yet, the sector's exposure to policy-driven risks remains a concern. Commercial real estate (CRE), particularly the office segment, continues to be a soft spot. Banks with assets between $10 billion and $100 billion hold 199% of CRE loans relative to their risk-based capital—a stark contrast to the 54% held by megabanks. As the Trump administration's infrastructure plans gain traction, expect a shift in CRE demand toward industrial and logistics properties, forcing regional banks to reposition their portfolios.

Technological adaptation is another critical area. Banks are doubling down on AI to enhance fraud detection, automate customer service, and streamline operations. Bank of America's own experience—reducing its workforce from 285,000 in 2010 to 212,000 in 2025—illustrates how automation is reshaping the financial sector. While this boosts efficiency, it also raises questions about the long-term impact on employment and income inequality, which could influence consumer behavior in the years ahead.

Defensive Sectors: Opportunity in Uncertainty

For investors, the Trump-era economy presents both challenges and opportunities. Defensive sectors—healthcare, utilities, and consumer staples—have historically served as safe havens during periods of volatility. Moynihan's observation that consumer spending is “inelastic” to economic shocks underscores the appeal of these sectors.

1. Healthcare: Despite near-term headwinds from proposed drug pricing reforms, the sector remains a fortress of stability. Companies like Johnson & Johnson and Bristol-Myers Squibb benefit from inelastic demand and strong R&D pipelines.
2. Utilities: With the administration's push for energy independence and renewable infrastructure, utilities like NextEra Energy and Dominion Energy are well-positioned.
3. Consumer Staples: Brands such as Coca-Cola and Procter & Gamble continue to leverage their pricing power, even as trade tensions drive up input costs. ETFs like the Consumer Staples Select Sector SPDR (XLP) offer diversified exposure.

However, defensive sectors underperformed in Q2 2025 as investors rotated into growth stocks. This shift reflects a broader market optimism that Trump's policies will stimulate economic activity, particularly in technology and industrials. For investors, the key is to balance this optimism with hedging against policy-driven risks. A strategic allocation to defensive sectors—especially those with strong balance sheets and recurring revenue—could provide downside protection.

The Road Ahead: Strategic Entry Points

The Trump-era economy is neither a boom nor a bust—it is a recalibration. For financial institutions, the path forward requires agility in managing capital, risk, and regulatory changes. For investors, the focus should be on sectors and companies that can thrive in a fragmented policy environment.

• Capital Allocation: Banks with strong CRT programs and AI-driven operational efficiency will outperform.
• Policy Exposure: Investors should avoid sectors directly targeted by tariffs (e.g., industrials) and prioritize those with domestic production and pricing power.
• Defensive Exposure: ETFs like XLV (healthcare) and XLP (consumer staples) offer broad-based resilience.

In the end, the Trump-era economy is a test of resilience—not just for consumers and businesses, but for investors who must navigate a landscape where policy and markets are in constant flux. As Moynihan aptly put it, “The economy is not on the brink of a recession, but it's also not in a boom. It's in a holding pattern—and that's where opportunity lies.”