The election of Donald Trump has spawned breathless media coverage, fiery debates and protests. Most economic predictions and forecasts lean towards the extremes. The recent cover of Fortune magazine proclaims "The Promise and Peril of the Trump Economy". A recent headline in Barron’s touted, “Dow 30,0000!” On the complete flip side, longtime market prognosticator Harvey Dent predicts that 2017 will be "worse than the great depression.” The investment media, along with investment firms, advisors, bloggers and other market prognosticators, are in a mad rush to develop their “top 10 things to do now” lists. The major changes that President Trump is proposing provide much to consider and a lot of disagreement on potential outcomes. But what everyone needs to do more than anything right now is to stop and take a breath. First of all, it is impossible at this point to determine how much of the president's agenda will actually get through congress. Second, an investor's goal ought to always be disciplined and structured to meet his or her personal goal, regardless of economic and regulatory climate. For most people, trying to time the market is a loser's bet.
Still, there are a lot of potential changes worth digesting. Among the president's proposals is a tax overhaul that calls for lowering the corporate tax rate from 35 percent to 15 percent and for reducing the number of personal tax brackets for individuals (with the top rate dropping from 39.6 percent to 33 percent). Also on President Trump's agenda: a major reduction in regulations and a whopping $550 billion in federal infrastructure spending. Investors and financial advisors scrambling to identify the possible opportunities and pitfalls have a full spectrum of outcomes to consider:
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A major market decline never seen before or a major market increase with unprecedented growth
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Double digit inflation or moderate inflation
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A reduction in the global economy due to protectionism and trade tariffs
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A tech sector slump as tougher immigration laws drain talent from the industry
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A surge in banking and finance thanks to regulation rollbacks
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Major decline in other parts of the economy from the regulation rollbacks in banking and finance, which were specifically put into place to avoid another 2008 meltdown
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Massive U.S. deficit deriving from the massive infrastructure spending
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Updated infrastructure and increases in U.S. corporate profits leading to higher wages, lower unemployment and 2 percent to 4 percent growth