Even according to Washington's standards, the second Trump presidency started in a hectic way: massive shoots at federal agencies, tariff threats against allies and enemies and negotiating how they can get a Republican budget through a closely divided congress.
Managers and business investors are convinced that it will be okay, at least for them. “Markets do not show much worries,” noted Jason Pride, head of investment strategy and research at the Glenmede Trust Company.
But that could change, with implications with high commitment to the markets and the US economic prospects.
Investors fully expect the tax cuts of the first term of President Trump, who usually benefited companies and the rich, will be completely extended before the end of the year. Trade groups, including the Business Roundtable and the National Association of Wholesier distributors, are convinced that the expansion will be taken care of, especially because this would not “impose effectively, a tax increase,” Mr Pride added.
Yet arithmetic remains weak. The costs for renewing tax cuts can be a total of $ 4 trillion in 10 years. This means that the congress is left behind to exchange what else can save or collect money and whose federal benefits can be reduced.
The bond market – where traders praise the risk of both inflation and an economic decline – has his turn of worries of worries of the boomeranging style of negotiations on rates. The bet is that the threats of an input load are more of a geopolitric tool than an important raiser, because the administration has depicted the rates in budget discussions.
Some of the underlying calm stemes from the confidence of Wall Street in Finance Minister Scott Bessent. A billionaire Hedgefonds Manager Before he has adopted his new position, he has convinced many analysts that the ultimate package of policy that comes from the White House will be favorable as soon as it goes together, and he “also” added to optimism around lower deficits “In future budgets”, according to Matt Luzzetti, the chief economist at Deutsche Bank.
That optimism is difficult to fight with the aim of Mr Bessent to permanently make Mr Trump's 2017 tax cuts and Mr Trump's statement in the past days that social insurance programs on which many trust his political basis – including social security , Medicare and Medicaid – should not be cut as part of any cost -saving measure.
Various Republican legislators, including Senator Josh Hawley from Missouri, and eight house members, have repeated that position. Others want more cuts on the table. However, with a Republican majority of just a few votes in every room of the congress, it is unclear which legislative proposals will ultimately be given priority.
Much early Buzz about saving costs is aimed at the Ministry of Government Efficiency of Doge, the initiative led by Elon Musk to reform federal bureaucracy.
For many in the business world, including a co-founder of Airbnb and the Chief Executive of Palantir, Mr. Musk's cost-saving campaign offers the prospect that previously excavated sources of large-scale waste and fraud, once excavated, can help pay for tax cuts in future Budget calculations.
Mr. Trump and Mr. Musk have said that the cost -saving efforts can save trillions. But an analysis of the New York Times of the savings of $ 55 billion by doge, claimed savings, it turned out that mathematics is marred with accounting errors, incorrect assumptions, outdated data and other errors.
“With more than 90 percent of the government spending that does not fall into the categories -discretionary, interest and defense expenditure, his options to reduce the deficiency in equipment, without increasing taxes, is quite limited,” said David Rogal, a head portfolio manager at Blackrock.
Various analysts at conservative think tanks have criticized Mr Musk and misleading both voters and business people about where the majority of federal expenditure is located.
“Unless you mainly concentrate” on the vast majority of the budget “spent social security, Medicare, Medicaid, Defense, Veterans and interest payments to bondholders, you should not be taken seriously as a shortage -oriented shortage,” Jessica said, ” said Jessica Riedl, a senior fellow with the right -wing Manhattan Institute ” Rest, but the real money is there. “
Mr. Pride of Glenmede said that the expiry of tax cuts could dampen economic growth this year. But he also said that “option 2” would have significant cuts on the budget for Mr Trump and Mr Bessent – “have a similar economic impact, through different channels, because the government spends directly in the economy.”
Apart from possible effects on the health care and food security of households, many economists believe that the hundreds of billions of dollars are proposed by some members of the congress – in combination with substantial dismissals of the federal worker – job growth and the sale of the retail trade delay.
Business groups have argued for decades that federal budget deficits can and should be tackled by lower expenses, rather than larger tax revenues.
What is new is that as the population gets older, the mandatory expenses for old -age insurance have risen. The military budget and federal interest payments for bondholders also continue to grow.
On the campaign track, Mr. Trump made a series of populist tax promises to voters. Promises to stop taxing tips or overtime, to reduce taxes for companies that make their products in their own country and to eliminate taxes on social security payments have collected a wave of popular support. But those initiatives – which would jointly lower tax revenues by around $ 1 trillion – seem to lose weight from the priority list of many in the congress.
The White House and its allies “have many expenditure and tax reduction ideas and very little plausible, non-gimmicky pay-fors,” said Stan Veuger, an economist and senior fellow with the right-handed American Enterprise Institute.
Kim Wallace, a senior director of the investment strategy firm 22V research that leads the Washington Policy Risk team, said that he feared that “at the end of this process, whether it is June or December, there will be a fudging of the figures and then will be there are a confrontation between proponents of Fudging figures' in the congress and experts of the non -party -bound committees in the congress That formally 'score' income and expenditure.
Such a confrontation could sharpen markets. But from notes that are shared with customers and financial chatter on television, a vast majority of economists, analysts of government matters and asset managers in Wall Street believe that budgetary math will be devised.
“It will be difficult to meet the various objectives of the administration – lower shortages, lower taxes and strong growth – through this policy,” said Mr Luzzetti of Deutsche Bank. “An approach that I think is most likely is to shorten the timeline for tax cuts.”
That, he said, “will mean more tax cuts in the short term, but a smaller sticker price” than the usual 10-year horizon used to pass on budgets with slim majorities.
This would be done with an expectation of the American business community that tax cuts would not be done, but would be renewed again in later years, which contributes to deficits.
However, markets remain the most focused on inflation in the medium term and in turn the path of interest rates. Traditionally, economists and managers consider rates as an inflatoire, because companies usually try to pass on the costs of the tax to consumers.
However, Mr Bessent has expressed the confidence that the inflation expectations will remain tame and that when certain rates are set, they will stimulate a “one-off shift in the price level” and not continue to stimulate-an idea that is supported by a Key Federal Reserve Official.
Mr Trump's recently announced plan for 'reciprocal' rates against all trading partners – together with taxes on steel and aluminum import and unsolved threats against Canada and Mexico – can still disorient the global trade.
But investors of bonds seemed reassured due to the lack of detail in the pronunciation. And the president indicated that mutual measures would not be determined before the beginning of April.
