As the possibility of a Trump victory in the upcoming election increases, Evercore ISI has highlighted three key policy themes that could significantly impact markets under a potential second Trump administration.
These themes, derived from the firm's ongoing Trump 2.0 series, provide insights into the economic and market implications of Trump's agenda.
Tariffs, Immigration, and Taxes: Evercore notes that Trump’s "big three" macro policies—raising tariffs, restricting immigration, and extending existing tax cuts—collectively point towards lower growth and higher inflation.
Evercore ISI adds that "the high fiscal cost of continuing the expiring tax cuts leaves relatively little scope for new tax cuts," leading to larger long-term structural deficits. This, combined with more aggressive tariff and immigration policies, results in a "far less pro-growth and more inflationary policy mix than Trump 1.0."
Deregulatory Agenda: Trump’s deregulatory approach is expected to boost profitability for certain industries, particularly financials and traditional energy.
However, analysts say it could negatively impact other sectors, such as health care, and create uncertainty for big tech. The firm explains that a Trump victory is "broadly positive for financials and traditional energy" but "negative for certain health care sectors and creates uncertainty for big tech."
Geopolitical Risks: Geopolitical risks will remain high with Trump potentially representing a new source of uncertainty, say analysts.
They explain that while Trump may look to resolve ongoing conflicts in Ukraine and the Middle East, U.S. alliances are likely to fray as he challenges traditional allies on economic and security issues.
Evercore ISI also highlights that "decoupling from China becomes U.S. policy, driven by an active tariff war but extending into other areas as well."
Analysts emphasize that Trump and his team would be much more prepared to execute their agenda from day one, with a more favorable judiciary aiding in faster and less clumsy implementation.
They state that Reince Priebus, Trump's first White House Chief of Staff, summed it up, saying, "Whatever Trump wants to do in his agenda, he's going to have the ability to do it much faster, less clumsy."