The Stock Market and Return of Trump: Should You Be Worried?

Wow, 2025 has already gotten off to a rocky start, especially if you live in Los Angeles. As fires raged in LA, President Trump was sworn into office and wasted no time shaking up major institutions and tearing down norms.

Should we be concerned that he’s going to tank the market and economy? Is the apocalypse coming? Today, I’ll share my somewhat optimistic perspective and, hopefully, partially ease some of your concerns.

Bias and Perspective

First, a quick disclaimer. I’ll admit to a bit of bias. It likely won’t surprise you to hear that I didn’t vote for Trump. That said, my goal is to offer a balanced perspective on how the Trump presidency may impact the markets, the economy, and, ultimately, your investment portfolio. While I’m not a fan of the increasingly polarizing nature of our political landscape, I also believe it’s essential to address the elephant in the room.

Tariffs

With Trump, it’s important not to take his words at face value. He thrives on attention and often says whatever will generate the biggest headlines. His approach to trade appears to be a game of chicken with our largest trading partners.

Recently, he signed an executive order imposing 25% tariffs on Mexico and Canada, only to reverse course after negotiations. At this point, the market isn’t taking him at face value either.

If major tariffs are enacted, they could significantly impact consumer spending by driving up prices. Companies affected by the tariffs are likely to pass these additional costs on to consumers, leading to higher prices on essential imported goods.

This, in turn, could be inflationary, making everyday products more expensive and putting pressure on household budgets. However, it appears more like a negotiating tactic than a firmly established policy. While the market may react negatively if trade slows and costs rise, the full economic impact wouldn’t be immediate as it would likely take time to works its way through the economy.

Immigrants

Trump’s election promises regarding mass deportations of immigrants, beyond their severe humanitarian consequences, could also have significant economic ramifications. Immigrant labor is vital to key industries such as agriculture, restaurants, construction, and childcare—fields where there is often a shortage of willing American workers.

A sudden labor shortfall could drive up costs across these sectors, further fueling inflation. However, it remains uncertain how effective the administration will be in enforcing stricter immigration policies, particularly without cooperation from local governments, especially in states like California.

Government Spending and Debt Risks

We have also seen Elon Musk, now heading the department of government efficiency (DOGE), and his team of tech bros cut many government-funded programs and jobs.

Their approach often seems more about attention-seeking than thoughtful policy, as everything must be loud and politicized. That said, our system of checks and balances remains in place as federal judges have blocked some of their more questionable moves.

Reducing certain government expenditures is necessary. A key market risk is that foreign countries and institutions may stop buying U.S. debt which would push interest rates much higher.

We currently spend nearly a trillion dollars just on financing the interest on our existing debt. For context, the federal government collected $4.92 trillion in taxes in 2024 so that means about 20% is going to pay the interest on the debt service.

If deficit spending remains elevated, particularly in good economic times, it could lead to serious trouble down the road especially if we have a recession.

There is undoubtedly waste and inefficiency in government spending, and reform is needed. Bill Clinton enacted similar reductions in the late 1990s, but with a far more measured approach.

Unfortunately, subsequent administrations engaged in expensive wars, increased deficit spending, and implemented major tax cuts simultaneously, which worsened the problem.

Our national debt has surged over the past two decades, and both parties share the blame. Kicking the can down the road has been the easy route, but eventually, the bill comes due.

The deficit ballooned under Trump’s first administration as he cut taxes and increased spending so we’ll see if he is actually serious about reducing government spending this time around.

Market Update: International Leads in 2025

The U.S. dollar remains exceptionally strong compared to other currencies, which is great for Americans traveling abroad but presents challenges for U.S. exporters. A strong dollar also puts downward pressure on international stocks that are unhedged to our currency.

Recently, however, the dollar has started to weaken which is a positive sign for international investments. Additionally, market gains over the past few years have been highly concentrated in a handful of large U.S. tech companies, driving the S&P 500’s outperformance. But now, international markets are beginning to gain traction. In fact, international stocks have outperformed U.S. stocks year-to-date.

At Impact Fiduciary, we maintain a globally diversified portfolio, allocating roughly 30% to international investments, primarily through index funds with sustainable mandates. This positioning has provided a strong tailwind for our portfolios so far this year.

The Federal Reserve has maintained steady interest rates after cutting by about 0.75% in 2024. Inflation has ticked up slightly in recent months and is now sitting at 2.9%, above the Fed’s 2% target.

Meanwhile, the unemployment rate has remained consistently low at around 4%. The economy remains strong which has led to the market continuing it’s upward trajectory.

Tracking Your Investment Portfolio

Staying informed about your investments is important, but checking your portfolio daily or too often can create unnecessary stress.

By partnering with Impact Fiduciary, you’ve made a smart decision to delegate investment management, allowing us to navigate the market and oversee your portfolio so you don’t have to. A good cadence is to check in no more than once a week, or if possible on a monthly or quarterly basis.

Our goal is to help take the stress out investing so you can focus on the things in life that are most important to you.

Final Thoughts

Presidents often receive more credit or blame than they deserve. Market movements are ultimately driven by core economic factors such as consumer spending, technological advancements, inflation, and unemployment. That said, the Trump administration appears to view the stock market as a scorecard of its success.

Since maintaining power is their priority, they are likely to do what they can to keep the economy strong. I don’t believe they would deliberately sabotage the economy or the markets.

Keep in mind that a market correction of 10%, or even a bear market with a 20% decline or more, is always a possibility and should almost be expected. The challenge is that these declines are nearly impossible to predict. In hindsight, they always seem obvious, but accurately timing them is almost impossible.

History has shown that the best strategy remains the same: diversify, stay the course, and keep investing especially during downturns and even uncertain times like today.

So take a deep breath, turn off the news, and remember: everything will be alright. And even if it’s not, it will still be alright.

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Patrick Dinan, and all rights are reserved.