Trump's Policies: Which Ones Matter Most to the Market?

As the dust settles on the 2024 U.S. presidential election, investors are eager to understand how Donald Trump's policies might impact the stock market during his second term. While the new administration's agenda is still taking shape, we can analyze historical data and market reactions to identify which Trump policies have had the most significant impact on market performance.



1. Tax Cuts and Jobs Act (TCJA) of 2017: The TCJA, signed into law by President Trump in December 2017, was one of the most significant tax overhauls in decades. The act reduced corporate tax rates from 35% to 21%, which led to a surge in stock prices. According to a study by the Federal Reserve Bank of Philadelphia, the TCJA was responsible for about 40% of the S&P 500's post-tax reform rally. The tax cuts also boosted corporate earnings, which further drove stock market gains. As Trump seeks to extend and expand these tax cuts, investors anticipate a potential boost to corporate earnings and stock prices.

2. Trade policies and tariffs: President Trump's trade policies, particularly the imposition of tariffs on imports from China and other nations, have had a significant impact on market performance. While the initial impact of tariffs was negative, with the S&P 500 dropping 11% between January 26 and February 8, 2018, the market later recovered as investors anticipated a resolution to the trade disputes. Additionally, the Trump administration's "America First" policy, which aimed to protect U.S. industries, contributed to market volatility and sector-specific performance. For instance, the energy sector benefited from the administration's support for domestic oil and gas production, while the technology sector faced headwinds due to trade tensions with China.



3. Immigration policy: Trump's immigration policies, including his plans to reduce the number of undocumented immigrants currently residing in the U.S., have the potential to impact the stock market. While the economic implications of mass deportation are uncertain, some experts suggest that losing a significant portion of the workforce could have inflationary implications. This could lead to increased prices for businesses and consumers, potentially impacting the overall market performance.



4. Infrastructure spending: Trump's infrastructure spending plans, which aim to invest in roads, bridges, and other public works projects, could have a positive impact on the stock market. Infrastructure spending can stimulate economic growth, boost corporate earnings, and drive stock prices higher. However, the extent to which these plans will be implemented during Trump's second term remains uncertain.



In conclusion, while the full extent of Trump's policies during his second term is still uncertain, historical data and market reactions suggest that tax cuts, trade policies, immigration, and infrastructure spending are among the most significant factors that could impact the stock market. As investors await more details about the new administration's agenda, they should keep a close eye on these policy areas and their potential implications for the market.