What will Trump’s first 100 days mean for markets?
Amid concern about tariffs, markets appear to be hedging their bets, but there’s plenty to suggest that Trump’s first moves in office could fall short of the worst expectations, says Michael Hewson
A lot of the recent turmoil in markets appears to be being blamed on concerns that Donald Trump, inaugurated as President today, could make inflation much more difficult to control if he delivers on his promises to raise tariffs significantly.
These fears have prompted a slide in global bond markets, pushing yields up across the board as investors dial back their expectations on the number of central bank rate cuts in 2025.
The US economy currently appears reasonably robust – yet concerns are rising that the implementation of tariffs from anywhere between 10 and 60 per cent could spark a consumer slowdown as companies pass on the effects of any increase in costs, as well as keeping inflation high.
When Trump was on the campaign trail, he was quite vocal on his desire to encourage US multinationals to onshore their production capability when he said “the most beautiful word in the entire dictionary of words is the word ‘tariff’”.
He also pledged to invest on a large scale in home grown energy security, or as he puts it: “drill baby drill”
Of course, what politicians say on the campaign trail is one thing; they then have to deliver on those promises, and this is usually when the rubber hits the road. That said, Trump has never been shy of pushing back on the usual consensus, hence the concerns being felt across financial markets.
There have been any number of opinion pieces in the past few weeks warning that Trump’s second term in the White House could bring chaos to the world and be a generally bad thing all round.
Against this sort of narrative is it any wonder then that markets are hedging their bets?
These concerns may well be overblown as we do have previous experience to call on when looking at what Trump says and then what he does. It was another US President, Theodore Roosevelt who coined the phrase “speak softly, but carry a big stick”.
Trump seems to operate this in reverse, talking loudly, extracting concessions and then implementing measures that fall short of the worst of expectations.
We do have previous experience to call on when looking at what Trump says and then what he does
We can but hope that this same pattern plays out again. In his first Presidency, Trump signed off a number of executive orders within days of coming to office and the effects on the US economy managed to be absorbed.
There is also the fact that Trump will have his hands full as soon as he gets into the Oval Office with managing the Federal response to the tragic Los Angeles wild fires, which is likely to take up a lot of his time in the opening days.
They say the first 100 days of a US Presidency set the tone for the next two years and with a majority in both houses Trump is unlikely to be constrained in the same way as he was in his first term.
That is probably the real fear that markets have as we head into 2025, however one of the things Trump always tends to keep an eye on is the stock market. In his first term he was always tweeting about it.
Any sharp falls in US stock markets could derail some of his more ambitious plans but one thing is certain, the first 100 days should give us a decent steer as to what type of second term we can expect.
Michael Hewson is a podcast host and writer at Good Money Guide. He was formerly chief market analyst at CMC Markets.