Weekly Buzz: What Trump in office means for your portfolio 🏛️

5 minute read

Donald Trump is back in the Oval Office and the markets are feeling the buzz – so let's cut through the noise and look at what really matters for your investments.

Trump 2.0: Things to look out for

Trump’s hard stance on immigration might pack an even bigger economic punch than his talk of tariffs. Unauthorised immigrants make up about 5% of the US workforce. If large-scale deportations do happen, economists estimate the US economy will shrink by 7.4% by 2028. For scale, that's about the size of California’s entire economic output. This reduction in the workforce will drive wages and inflation higher.

Despite Trump's tough rhetoric, particularly on China, we’ll likely see a more nuanced approach. The administration is likely to favour targeted measures over broad-based tariffs that could hurt US consumers. With inflation still fresh on everyone's mind (those grocery bills don't lie), expect more surgical strikes than an all-out trade war.

Trump's administration is also set to renew deregulation efforts, particularly in the energy sector. This could mean revoking restrictions on LNG terminals and expanding oil and gas activities on federal lands – affecting both domestic energy prices and America's role in international climate agreements.

What’s the takeaway here?

It’s likely we’re in for many attention-grabbing headlines over the course of Trump’s second term – so it’s a good moment to remember that economic fundamentals (things like growth and inflation) usually matter more to markets than political noise.

Trump's policies could mean stickier inflation even as the economy grows. So if you've got cash sitting on the sidelines, it might be time to put it to work. Historically, this "Inflationary Growth" environment – something our General Investing portfolios are already positioned for – has been good for equities, which perform well as economic expansion drives demand and higher prices support revenues.

Want to learn more about navigating Trump 2.0? Head over to our 2025 Macro Outlook.

📰 In Other News: China ended 2024 with a bang

China's economy blew past expectations, expanding 5.4% in the fourth quarter of 2024 compared to a year earlier. That's its fastest pace in nearly two years – and enough to hit the country's 5% annual growth target. Analysts had penciled in growth of 5%, which alone would have marked a significant pickup from the previous quarter's 4.6%. Despite this momentum, China still faces some economic headwinds – not least of which is Trump’s threat of tariffs on Chinese goods.

But for all that growth, markets reacted with reservation. The CSI 300, China's blue-chip stock index, saw only modest gains, while the yuan made minor advances against the US dollar. With the Lunar New Year just around the corner – traditionally a key indicator of consumer spending and economic vitality – it seems investors are taking a wait-and-see approach.

While last year's stimulus measures should continue supporting both consumer spending and business activity, some analysts question whether those government initiatives will be enough. The country isn't slated to announce its new economic targets until March, but most analysts expect another 5% growth target for the year ahead.

📖 A Little Context: Trade wars

The phrase "trade war" entered textbooks when the US passed the Smoot-Hawley Tariff Act in 1930. The attempt to protect American farmers turned global when countries retaliated with their own tariffs, causing international trade to plummet by 65% – turning a recession into the Great Depression.

In trade wars, everyone loses. It's why modern trade disputes are usually handled through negotiations and bodies like the World Trade Organization, rather than escalating into all-out economic warfare.