News on Friday centered on a historic event, the inauguration of the 45th President of the United States. The inauguration marks the transition of power to the incoming president. What impact will President Donald Trump and his new administration have on the economy? This is a common question whenever a new administration enters office, and it is hard to know exactly what to expect. Economists believe there are a few likely themes to watch for from the new administration.
Some of the likely themes include tax cuts, regulatory reform, fiscal stimulus, and increased infrastructure spending. These themes reflect President Trump’s pro-growth attitude. This perspective is aiding the private sector already; business optimism increased in the last couple of months to levels not seen since 2004.
There are possible threats to the growth themes of the new administration. An overzealous Fed could raise interest rates more than expected, slowing economic growth created by expansionary fiscal policies. One of the biggest unknowns is changes or repeals to current trade deals and the use of tariffs on imported goods. Any changes or repeals may increase prices on imported goods and services in the U.S., which could potentially slow economic growth.
The optimistic view of the economy appears to be priced into the stock market. We could see the stock market moderate its advance during the transition to the new administration. Market participants will wait to see if corporate earnings catch up to the price appreciation experienced since early November. Now is a great time to review your investments and to make any adjustments. Market activity in 2016 could have created in unbalanced portfolio in sectors that may underperform in 2017. Having a well diversified portfolio is what produces good long term results and we can help you evaluate where you are and what changes you may wish to make to make 2017 a great year for your investments.
If you have any questions on this discussion, please contact your Security National Bank advisor today.
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