4 Ways the Trump Administration Could Impact Your Stock Investments in the Next 3 Years
Written by
Vance Cariaga
Edited by
Jenna Klaverweiden
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President Donald Trump’s impact on the stock markets started almost immediately after he took office this year and has reverberated ever since.
The markets crashed hard after Trump unveiled his ambitious tariff plans early on in his second term. But when he later eased off those tariff plans, Wall Street entered a monthslong rally that pushed the major indexes to record highs.
For investors, the wild cards are how much longer the momentum can continue — and how Trump’s policies might affect stocks moving forward. Here are four ways the Trump administration might impact your stock investments over the next three years.
Tariffs
Trump and his team have made tariffs a cornerstone of their economic policy, with the dual aim of bringing more parity to global trade and more manufacturing back to the United States. But the stock markets clearly don’t like it when Trump threatens higher tariffs on key trading partners such as China, Canada and Mexico.
The full effect of the tariffs hasn’t been seen yet because many companies accelerated their shipments before tariffs increased, Charles Schwab noted in a recent report. That will likely change as the full impact starts hitting imports and exports.
“Growth and profits may eventually slow, but the inflation impact is already more gradual than initially expected,” Schwab noted. “We believe tariffs hurt economic growth and cause an increase in prices, but fiscal and monetary stimulus, as well as other secular trends like spending on the artificial intelligence (AI) arms race could offset the impact.”
Immigration
Stricter immigration policies by the Trump administration “could tighten the U.S. labor market,” according to an analysis published earlier this year by Timothy C. Murray, CFA, a capital markets strategist at T. Rowe Price. That, in turn, could have an impact on wages and prices.
“U.S. small-caps could face headwinds because they tend to hold more debt and lack pricing power, making them more sensitive to inflation, higher rates, and the economy,” Murray wrote.
Spending Bills
Trump’s One Big Beautiful Bill made headlines when it was signed into law earlier this year. That, as well as any other future spending bills, could have a big impact on the stock markets.
The current bill “could boost certain U.S. equity sectors, but it also raises concerns over rising U.S. deficits and higher rates,” according to a Morgan Stanley Wealth Management report co-authored by Monica Guerra, head of U.S. policy, and Daniel Kohen, a U.S. policy strategist.
“The tax law could be a boon to U.S. equity sectors with high capital expenditure needs,” they wrote. “It could also benefit domestic industrials, communication services and energy infrastructure stocks with elevated capex needs and U.S.-based revenues.”
However, they noted that it also could cause challenges for stock sectors that rely on government incentives that were eliminated or reduced in the bill, such as clean energy and healthcare.
Intervention in Individual Stocks and Sectors
The Trump administration has intervened “on behalf of chosen companies,” according to Investor’s Business Daily.
For example, the president “pushed” Nippon Steel to make investments to upgrade plants owned by subsidiary U.S. Steel and build a new plant, per Investor’s Business Daily.
Although some parts of the strategy might be warranted, it also poses certain risks. “Favored firms and their stocks may thrive, but competition and the U.S. economy could suffer long term,” Investor’s Business Daily noted.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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