What investors expect from Trump
Goldman Sachs Exchanges
Deep Dive
What are investors most nervous about regarding potential policy changes under the second Trump administration?
Investors are most nervous about the prospect of a universal 10-20% tariff on all goods from all countries, with 60% of survey respondents citing it as the top risk. Other concerns include fiscal sustainability and the impact of deportations on growth and inflation.
What is the baseline expectation for tariffs under the second Trump administration?
Most investors expect additional tariffs on imports from China and autos, particularly from the EU, but do not anticipate a universal tariff on all goods from all countries. The average probability assigned to a universal tariff is 35%, slightly below Goldman Sachs' estimate of 40%.
How do investors expect immigration policy to change under the second Trump administration?
Investors expect net immigration to average around 750,000 per year, a significant drop from the 3 million in 2023 but only slightly lower than pre-pandemic levels. Most respondents anticipate authorized immigration to remain steady, while unauthorized immigration could drop to net zero.
What are investors' expectations regarding tax cuts under the second Trump administration?
Nearly all investors expect the 2017 tax cuts to be extended, with two-thirds anticipating full extension and one-third expecting partial extension. Additional tax cuts, such as no tax on tips or overtime, are expected to be modest, around 0.2% of GDP or $60 billion, due to concerns over fiscal sustainability.
What is the expected impact of tariffs on inflation under the second Trump administration?
Tariffs are expected to have a one-time inflationary effect. A 3-4 percentage point increase in the effective tariff rate could raise the price level by 0.3-0.4%, pushing inflation to the mid-2% range. A universal tariff could triple this impact, raising the price level by 1% and temporarily pushing inflation above 3%.
How might the second Trump administration's policies impact economic growth?
The policies are expected to have offsetting effects on growth over a 2-3 year horizon. Negative impacts, such as reduced immigration and tariffs, may occur sooner, while positive impacts, like tax cuts, could take longer to materialize. Overall, the growth trajectory of the U.S. economy is not expected to change substantially.
How do Goldman Sachs' views on Fed policy differ from market expectations?
Goldman Sachs believes market expectations for higher interest rates due to tariffs are too hawkish. They argue that the inflationary impact of tariffs is modest and one-time, and the Fed may prioritize risks to growth over inflation. They expect the Fed to cut rates in December and continue easing in Q1, contrary to market pricing.
- 60% of investors cited a universal 10-20% tariff as their top concern.
- Concerns about fiscal sustainability and immigration policy also ranked highly.
- Most investors expect some additional tariffs on imports from China and autos but not a universal tariff.