The New Administration and Investors: 7 Key Areas to Watch

Eagle Wealth Management |
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Weekly Market Commentary

 

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Hello,  


Following the 2025 inauguration, financial markets are adjusting to new political realities. After an initial post-election rally of 5.3% with dividends, markets have since retraced about half those gains.1

So, while the president already signed dozens of executive orders, many of the new administration’s policy details are still uncertain and much could change in the coming weeks.

However, key areas will certainly include taxes, fiscal spending, trade, energy, and immigration – all of which could impact the economy.

Let's examine the seven critical areas that may impact the investment environment:

1. Tax Policy Continuation

U.S. Individual and Corporate Tax Rates Chart

With Republican control of Congress, a primary focus will be extending the Tax Cuts and Jobs Act beyond its scheduled 2025 expiration. This would maintain the 37% top marginal rate for individuals, the 21% corporate tax rate, and enhanced estate tax exemptions. While the legislative process continues, these extensions appear likely.

However, the relationship between tax rates and economic performance isn't always straightforward. Current rates remain historically low, though growing national debt may require future adjustments.

2. Federal Budget Dynamics
The fiscal situation continues to draw attention, with 2024 federal spending reaching $6.75 trillion and creating a $1.83 trillion deficit. The national debt now exceeds $36 trillion. The administration has established the Department of Government Efficiency (DOGE) to identify potential spending reductions, though meaningful deficit reduction has proven challenging for both major parties in recent years.

The last balanced federal budgets occurred in the 1990s, and despite public support for fiscal discipline, achieving this goal remains uncertain.

3. Trade Policy Evolution

U.S. Trade Balance by Country Chart

The administration proposed comprehensive tariffs of 10-20% on imports, with higher rates for specific countries. President Trump specifically announced 25% tariffs on Canadian and Mexican goods starting February 1, alongside plans for an "External Revenue Service."

The U.S. trade deficit reached $78.2 billion in November 2024, reflecting both dollar strength and robust consumer demand. While tariffs constitute less than 2% of federal revenue, their potential impact on inflation and international relations requires careful consideration.

4. Energy Sector Focus
The administration declared an energy emergency and established a National Energy Council to expand domestic production. As the world's leading oil producer and natural gas exporter, U.S. energy policy significantly affects global markets. Recent regulatory changes are reversing previous drilling restrictions, potentially supporting price stability amid global uncertainties.

5. Labor Market Impact
Immigration policy changes could affect workforce dynamics, including skilled worker programs like H1B visas. With job openings exceeding available workers by 1.2 million, immigration policies may significantly influence labor market conditions.

6. Market Response
Initial market enthusiasm reflected expectations for business-friendly policies. Certain sectors and assets, including cryptocurrencies, have seen notable gains, with Bitcoin surpassing $100,000. However, markets rarely move uniformly upward, emphasizing the importance of diversification.

7. Historical Context

The Economy and Presidencies Chart

Economic growth historically has occurred under both political parties, as broader economic cycles often matter more than presidential administration policies.

So, while good policies do matter and can drive productivity and growth, there are many underlying factors that impact investors more than which party happens to be controlling Washington D.C.

The bottom line? 
While presidential policies merit attention, we’ll maintain perspective and focus on the long-term financial objectives.

Warmly,

Your Eagle Wealth Team

 

 
Tax Time

Deadline to File 1099 Forms

This is a friendly reminder that the deadline for filing the 2024 Forms 1099 is this Friday, January 31st.

You may need to issue a Form 1099 to un-incorporated vendors that you paid a total of $600 or more to for SERVICES for business purposes during 2024.  Common examples of items that would require you to issue a 1099 is if you paid independent contractors for services, rent to a landlord, or professional services like accounting fees.  This only applies if these payments are made for business purposes, and not personal.  Also, it only applies if the person that you made the payments to is not a corporation (including an S-Corp).  One exception to the corporation rule is regarding payments made to any attorney.  You must issue a 1099 for $600 or more paid for legal fees regardless of whether the person/business is a corporation.   

All Form 1099-MISC and Form 1099-NEC must be sent to the recipients by January 31, 2025.  The transmittal Form 1096 and the Form 1099 (IRS copies) also need to be filed by January 31, 2025.

Please confirm with your bookkeeper to make sure they are preparing these forms for you. More information and filing options are available on the IRS website here.

Market Insights

This week, we're trying something new with our market updates.

Instead of just summarizing the past week, we’ll be sharing insightful articles that highlight key trends and developments in the market. Our goal is to keep you informed without focusing too much on weekly fluctuations.

We’d love to hear your feedback, so feel free to reach out if you have any questions or want to dive deeper into the subject.

House floating in water

Check out this timely article about the U.S. housing market!

A lot has been happening with the housing market these days—from the costs reaching historical highs to the challenges of housing availability. Recent issues related to climate change are also affecting property insurance cost and coverage.

1. S&P index total return, as of January 17, 2025.

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