November 11, 2024
Like all of us, we are pondering a world under Trump 2.0. Here are a few of my post-election thoughts:
- Continuing partisan divisions: Vice-President Kamala Harris’s concession speech was brief and businesslike. The word “fight” was used 16 times, while the concession and congratulation part was a bare utterance. I noted the omission of the usual call for unity and bipartisanship needed for effective governance, which had been a campaign theme. The struggle for freedom, another Harris theme, alluded to Trump’s pre-election threats of retribution. Republicans can expect a congressional firefight to pass legislation, especially regarding the anticipated budget-cut bills.
- Economic and Policy Changes: There will be clear policy shifts on taxes, trade relations, healthcare, and energy independence. Recognizing the importance of Elon Musk’s endorsement in his victory, Trump will lean on Musk to try to convince the public that taxes can be cut but only as and when spending is cut, especially in healthcare. Democrats in Congress will have nothing to do with that, pointing to the fact Musk and Kennedy were not elected.
- International Relations: World leaders have sent obligatory congratulatory messages, but the plain truth is they mostly resent the man, laughing at him at the United Nations and at international conferences. Behind the scenes, most nations will brace themselves for trade tariffs and other forms of globalist withdrawal. Ukraine is the biggest global concern right now, and Trump has signaled his plans to cut aid to Ukraine and to let Russia do as Putin pleases unless Europe steps up to fight its own battle.
- Domestic Issues: The immigration problem will be addressed, and this is one area in which the Democrats will show bipartisanship unless Trump tries to establish gulag-type prisons to deport immigrants, most of whom the Democrats believe are legal. The abortion and racial justice issues will fade into the background as these were mostly campaign rhetoric from the Trump side. The Republicans will try to push these issues to the individual States.
- Constitution and the Rule of Law: Despite the campaign rhetoric, it will be virtually impossible for Trump to change these areas. While the Supreme Court has already enabled Trump to act above the law, that change will remain true for all future presidents. The states, however, will continue to fight for their constitutional rights to the extent that I foresee continuous litigation that will endure throughout the Trump presidency. No matter how hard he tries to become all-powerful, including his retribution plans, the Constitution does and will continue to protect the rights of individuals.
- Financial Markets: The day after the election, equity prices soared, and bond prices sank. Investor sentiment got a little out of hand but will be pulled back as equity prices already exceed fundamental values in the extreme. The Fed will likely continue to reduce its policy rate as inflation, at least until the Trump tariffs are implemented, is under control and key aspects of the economy, like soaring debts and interest expense pressures, are problematic. Financial markets are now illiquid, which will constrain risk-taking, putting a cap on equity and bond prices. Warren Buffett’s decision to horde cash exemplifies what the public will do when the market’s “stories” get tiresome. Trump can do nothing to stop the equity market sell-off, which I foresee in 1Q2025.
- The US Dollar and Gold: Initially, the Dollar will be strong, but in 2025, it will become an albatross to the new Administration plans. Taxes will be cut more than spending, and debts against real estate will implode, weakening the dollar. Precious metal prices will rise, but that picture will become somewhat of a background issue as the Silicon Valley billionaires behind Trump – led by Peter Thiel – attempt to replace the Dollar with Bitcoin. I see that as the biggest financial story of 2025. As far as gold and silver are concerned, this is tied to the strength of the Euro, which is questionable until the Ukraine war is resolved, and the BRICS currency, which has become a popular topic in the media. The latter will take many years to become a world reserve currency because those nations do not have the backing of a strong bond market, like the US. The US Dollar will remain the world’s reserve currency for many years, and the Federal Reserve System will fully control global central banking until Silicon Valley billionaires like Musk and Thiel, who believe their interests are above the country, achieve control of the cryptocurrency market. I anticipate that it will take between five and ten years. In the meantime, gold prices and the US dollar index will soar and crash, causing enormous volatility in financial markets.
I am sure many of you have post-election thoughts. I’d like to hear them.