Effects of Trump's Presidency on Portfolios in the Initial Six Months
In the first six months of President Trump's 2025 term, investment portfolios faced significant volatility. The primary drivers of this turbulence were aggressive tariff policies, a large tax and spending bill, and economic uncertainties.
Tariffs created market instability, particularly affecting consumer spending and sectors like autos where prices rose, impacting portfolios sensitive to consumer behavior and inflation. The passage of the "Big, Beautiful Bill," a major tax cut and spending legislation, added to fiscal deficits, moderately pressuring bond yields but also sustaining corporate profits.
The "big, beautiful bill" is expected to add over $4 trillion to US debt over the decade, raising concerns about long-term debt sustainability and influencing Treasury yields. Short-term yields rose amid worries but later stabilized, with a forecasted decline in yields as the Fed is expected to ease later in 2025.
Volatility also affected technology stocks and global markets, which react sensitively to trade policy shifts and economic prospects. Despite headwinds, US corporate profits remain robust, supporting equity markets in the short term.
Economic indicators show signs of slowing growth and potential inflation acceleration, raising concerns about future recession risks, especially given consumer spending declines and tariff-driven price pressures.
The Trump administration's tariff policy has created significant uncertainty in the corporate world, with many CEOs warning of a significant headwind from tariffs that will raise costs for companies and potentially prices for consumers.
The path to greater certainty on trade policy is likely to be uneven, according to Glenmede's Chief of Investment Strategy & Research Jason Pride and Vice President of Investment Strategy Michael Reynolds. As long as the Trump administration continues its stop-and-start approach to trade, investors should consider including global stocks in their portfolios.
The Trump administration's recent headway with China provides a silver lining for tech companies and tech investors, with a slight relaxing of restrictions on some chip sales. However, a genuine concern for many tech companies, including AI chipmaker Nvidia, is the potential tariffs that Trump may apply to imported semiconductors.
The odds of a U.S. recession have decreased from 45% to 20% according to Polymarket, following President Trump's pullback from tariffs and deals made with several countries. Elon Musk, known for his outspoken views, has formed the America Party to protest the size of the U.S. national debt and deficit. By 2034, the annual interest costs on the national debt will exceed the annual budgets of both Medicare and the Department of Defense.
In Europe, coordinated policy support for Ukraine and moderate fiscal expansion focused on infrastructure, innovation, and healthcare are increasing Europe's credibility as a geopolitical and economic counterweight to the United States.
Overall, investment portfolios during Trump's first six months have had to navigate tariff-induced volatility, shifting fiscal policy, debt sustainability concerns, and potential economic slowdown signals, leading to a complex and evolving market environment.
Crypto and DeFi investors have been monitoring the political climate closely, as the ongoing trade policy discussions and potential economic slowdown might have implications for the digital asset market. The growing national debt and deficit, as illustrated by Elon Musk's new political party, could impact general-news headlines, which could in turn influence the initial coin offerings (ICOs) and the broader crypto space.
