As Donald Trump embarks on his second term on January 20, 2025, his economic agenda is poised to reshape global financial markets, predicts Nigel Green, CEO of deVere Group, a leading financial advisory and asset management firm. While this agenda may stimulate short-term growth, Green cautions that it will also usher in significant market shifts, presenting both opportunities and risks for investors.
Trump’s key economic policies—tax cuts, deregulation, and a $1.5 trillion infrastructure plan—are expected to trigger market rallies and bolster select sectors. However, broader economic challenges, including rising inflation, protectionist trade measures, and increased market volatility, could temper these gains.
Equities and Inflation: A Balancing Act
The initial months of Trump’s presidency are likely to witness equity market rallies fueled by tax reductions and deregulation. Sectors such as energy, technology, and financial services are expected to benefit significantly from lower corporate taxes and reduced regulatory burdens, fostering investor confidence.
However, Green warns that inflationary pressures from fiscal stimulus and infrastructure spending may offset these gains.
“While tax cuts and deregulation will drive growth, they come with costs,” says Green. “Higher demand for goods and services, coupled with infrastructure investments, will push prices upward.”
Inflation, currently at 3.7%, could accelerate to 4-5% by mid-2025, potentially reducing disposable income and curbing consumer spending. Rising inflation may also prompt the Federal Reserve to hike interest rates, increasing borrowing costs for businesses and consumers. This combination of inflation and tighter monetary policy could lead to heightened market volatility, requiring a cautious approach from investors.
A Strengthened Dollar and Emerging Market Risks
Trump’s fiscal policies, coupled with rising Treasury yields, are expected to bolster the US dollar. While this strengthens its appeal as a safe-haven asset, it also creates challenges for exporters and emerging markets with significant dollar-denominated debt.
“A stronger dollar poses substantial risks globally,” Green explains. “US exporters may struggle as their goods become more expensive abroad, while emerging markets like Turkey and Argentina could face increased debt servicing costs.”
Emerging economies with weaker currencies or heavy reliance on dollar-denominated loans may experience heightened instability, further fueling global market volatility.
The Trade-Offs of Protectionism
A key feature of Trump’s economic strategy is his commitment to protectionist trade policies, including tariffs on imports. While politically appealing in the short term, Green argues that tariffs can have long-term negative effects.
“Tariffs raise import costs, driving up prices for consumers and making it more expensive for businesses to source materials. They often provoke retaliatory measures, which disrupt global supply chains and hinder economic growth,” he warns.
Industries heavily reliant on international supply chains, such as technology, retail, and automobiles, are likely to bear the brunt of increased tariffs. Higher input costs could lead to reduced competitiveness, slower growth, and higher consumer prices.
Bonds as a Haven
Amid potential volatility in equity markets, bonds may serve as a refuge for risk-averse investors. Rising Treasury yields and a stronger dollar could make US bonds an attractive option, particularly for those seeking stability during uncertain economic times.
“Despite inflationary pressures and potential interest rate hikes, US bonds remain a reliable investment for those looking to hedge against market risks,” Green observes.
Bitcoin’s Momentum
Trump’s pro-crypto stance and growing institutional adoption of digital assets may provide a significant boost to Bitcoin and other cryptocurrencies. Green predicts Bitcoin could surpass $100,000 in the first quarter of 2025, driven by regulatory clarity and increased institutional interest.
“Bitcoin’s evolution as a mainstream asset is accelerating,” says Green. “Trump’s policies will likely fuel its adoption, making it an attractive alternative for investors amid traditional market volatility.”
Strategic Approaches for Investors
Given the complex interplay of risks and opportunities, Green advises investors to adopt a vigilant and strategic approach. Sectors like technology, energy, and infrastructure may benefit from deregulation and fiscal stimulus, but challenges such as inflation, rising interest rates, and trade tensions require careful navigation.
“Proactive, well-informed investors can capitalize on opportunities,” Green concludes. “However, those who overlook the risks—especially inflation, tariffs, and volatility—may face significant setbacks. The first 100 days of Trump’s presidency will set the tone for the rest of 2025 and beyond.”
