America has decided to bring former President Donald Trump back to the White House for a second term and that decision, along with other election results, is getting the attention of financial planners.
Barry Glassman of Virginia-based Glassman Wealth Services said once the president-elect takes office, he’ll also be watching how any potential tariffs aimed at boosting domestic competitiveness will impact companies, especially those that import parts and materials.
“Higher tariffs on these components could disrupt supply chains and increase production costs,” Glassman said.
He also said other countries could respond to U.S. tariffs with tariffs of their own on U.S. exports, which could drive up prices from goods and services and tick inflation up.
Republican control in Congress, Glassman said, could also lead to greater spending, lower taxes and, with that, greater deficits. All that could translate to higher interest rates.
The goal for planners will be balancing a faster growing economy with a possible rise in interest rates that will affect businesses and mortgage rates.
For homebuyers, Glassman said, higher interest rates will make it more expensive for buyers to finance a home and will result in fewer people selling the homes they’re in, especially if they locked in lower mortgage rates.
Those higher rates, though, may get the attention of retirees and others looking for high yields on longer-term bonds and certificates of deposit.
“I think that over the coming weeks and months, retirees and conservative investors may find some attractive yields on some safe investments,” he said.
The stock market did respond to the news that Republicans will have control of the presidency, the Senate and possibly the House.
“Stocks overall had one of their best days in years, and we’ll see if this continues over the coming weeks and months,” said Barry Glassman of Glassman Wealth Services.
Glassman said hopes of deregulation led to financial sector stocks growing. Energy and industrial stocks also saw jumps from those seeing more infrastructure spending and drilling opportunities.
Small companies also were among the best performers the day after the election.
“These really fit into the sweet spot of potentially benefiting from less regulation, as well as a faster growing economy, but out of the cross hairs of the global tariffs that Trump may put in place — a small company that doesn’t necessarily do a ton of international global trading or have foreign offices,” Glassman said.
Despite the gains, Glassman urged investors to not make “oversized bets based solely on political expectations.”
And, historically, the markets perform better when Congress is split than when one party controls both chambers.
“Let’s see how this plays out over the coming weeks and months, and what numbers, as far as earnings for these companies, actually come to fruition to justify the jump in prices,” he said.
Glassman said everyone should expect the unexpected, too, because even if it seems like some sectors will thrive under an administration, he warned, “the market often has a way of defying expectations.”
