By Sean Allocca, The Daily Upside, featuring Brian Spinelli, CFP®, AIF®, Co-CIO
The whole “Trump Trade” thing is in full effect.
The markets jumped Wednesday as investors reacted to the news of a second term for President-elect Donald Trump. Stock futures soared, Treasury yields edged higher, and the dollar rose to its strongest level in a year. While markets generally tick up after close elections, investors seem to believe Trump 2.0 will help spur growth and ease regulation. But, for some advisors, there are still meaningful questions that need answers — especially around the particulars of his tax policies.
“There is a lot of uncertainty,” said Brian Spinelli, co-CIO at Halbert Hargrove. “Post-election, we are looking for more detail.”
They’re Eating the Tax
Advisors are pointing to the Tax Cuts and Jobs Act, a first-term Trump-era rule that changed deductions and tax credits for businesses, which is set to expire after next year. An increase in personal and corporate taxes, reduction in deductions, and a massive decrease of the estate tax exemption could take a toll on long-term and tax planning, according to Sean Williams, CFP, an advisor with Cadence Wealth Partners in North Carolina.
Republicans also took control of the Senate, giving the GOP the upper hand in tax and spending stand-offs on Capitol Hill, which will likely loom large over future policy. “The real impactful story to watch is TCJA,” he told The Daily Upside.
Born to Run. Taxes aside, the stock market is on a tear, and traders are already getting out their track shoes. They expected the market to have more room to run after a Trump win, according to an October Bloomberg survey:
- Almost 6 in 10 respondents anticipate the markets will perform better than they currently are performing under a Trump administration.
- The price of bitcoin is expected to rise to a new record above $80,000 by year-end.
- About a year from now, some 57% of respondents said they expect the price of gold to be higher under Trump.
“Trump is pro-growth, so overweighting a portfolio towards the US may not be a bad idea,” said Ashley Folkes, a CFP and planner with Farther. Small-cap stocks in sectors like manufacturing, industrials, and technology could be the biggest winners.
Playing the Trump Card. With the stock market at an all-time high, it could also be the time to use tax strategies, like donor advised funds, to help rebalance gains, said Jeremy Keil, a planner with Keil Financial in Wisconsin. “I’ve seen more people lose money by changing their portfolio because of politics than make money,” he told The Daily Upside. Still, “with stocks up and bonds sideways, you may have a lot more risk than you thought you did.”
