The failed assassination attempt on Donald Trump reminds us that more important than political bickering is the value of life. I hope there will be a coming together of both parties to help heal and strengthen the spirit of the American people. One inch to the right and Trump would probably be dead today.
After this incident, it is more than likely that Trump will be the 60th president of the United States. Like Ruth Bader Ginsburg, President Joe Biden refuses to step down despite his diminished state. As a result, the probability of Trump being the next president has increased from 65% before the assassination attempt to 80%.
As this is a personal finance site, I thought it would be good to discuss what a Trump presidency means for our investments. One of the keys as an investor is to think things through rationally, with the least amount of emotion possible.
In general, the Republican Party is for smaller government, lower taxes, and less regulation. The result of these policies could be an increased budget deficit. However, the general view from an investor’s perspective is that Republican policies are a net positive for your investments.
Here’s what you could see happen, although there are no guarantees:
1) A Melt-Up in the Stock Market
Despite an extraordinary rise in the S&P 500 since October 2022, a Trump presidency will likely add fuel to the fire. As a result, if there’s a time to be greedier when others are already greedy, it could be now.
Investors will get excited about the continuation of the existing flat 21% federal corporate tax rate or a potential cut in the tax rate. Since January 1, 2018, the nominal federal corporate tax rate in the United States has been a flat 21% following the passage of the Tax Cuts and Jobs Act of 2017.
With a lower concern for higher tax rates, corporations will logically set aside less money for future tax hikes and spend more to grow their businesses, which includes hiring. With potentially lower corporate tax rates, corporations will be able to boost their profits, thereby increasing their earnings per share, lowering their valuations, and increasing their dividend payouts.
The thing with investing is that potential positive catalysts don’t have to happen for stocks to go up. It is the hope and possibility of a potential catalyst that will help bid up stock prices.
As a result, despite high valuations in the S&P 500 and other stock indices, you probably want to hold on and continue dollar-cost averaging. If there is a 1% – 2% dip, you should probably buy. If there is a 10% or greater correction, you may want to back up the truck.
2) Tech Giants and Companies with Monopoly Power May Benefit More Under Trump
At the margin, President Biden is seen as a much tougher fighter against monopolies than Trump. In fact, battling monopolies is central to Biden’s economic strategy. As a result, companies facing antitrust suits like Amazon, Google, Microsoft, and Apple may see some relief under Trump, even though Trump also went after these companies.
Because we have not seen the federal government effectively break up tech companies’ monopoly power yet (just levy one-off fines), you probably want to just keep holding these big tech companies.
We operate in a society where the rich and powerful continue to get richer and more powerful. Hence, you might as well keep owning shares in these dominant companies.
As soon as I saw Google roll out their artificial intelligence snippets in 2024, which plagiarize content creators without giving any credit, I bought more Google stock.
There’s also no way I can overcome OpenAI and Anthropic’s copying of my work, so I became a shareholder in both through a venture capital fund, which anyone can invest in too.
3) Real Estate Will Likely Strengthen Under Trump
Trump has repeatedly admonished the Federal Reserve for its high interest rate policy. Trump is reportedly planning to override the Federal Reserve’s independence if he returns to the White House in 2025. The overriding of the Fed’s independence is unlikely to happen, but it’s nice rhetoric for votes from those hurting from high-interest debt.
Mortgage rates are already declining thanks to persistent disinflation since mid-2022. It is highly probable that the Fed will cut at least one time by the end of 2024 and multiple times by the end of 2025, regardless of who is President.
However, Trump built his fortune in commercial real estate. As a result, perhaps he will introduce more real estate friendly policies that will help the commercial real estate market recover.
Hold On Or Buy More Real Estate
With pent-up demand, a strong economy, and declining mortgage rates, there should be significant demand driving both residential and commercial real estate. As a result, I would not sell your rental properties or primary residence. Instead, I would hold on or buy more before a potential flood of demand.
I clearly remember the stressful times of bidding wars between 2000 – 2006, 2012 – 2018, 2020 and 2021, and the spring of 2024. Bidding wars are tough for buyers because there can only be one winner. I expect bidding wars to return in spring 2025 after a stronger-than-expected spring 2024.
If there is indeed a melt-up in the stock market, it will boost consumer wealth and help bring up real estate prices with it. The gap between the S&P 500 index and the S&P 500 real estate sector performance will likely narrow as a result.
I’m maxed out in terms of owning physical real estate after the purchase of our latest forever home in October 2023. Now I’m methodically dollar-cost averaging into private real estate through Fundrise. So far, I’ve invested $954,000 in private real estate since the end of 2016.
4) Trump may encourage you to work harder for longer
When income taxes are high, the rational economic move is to work less since you get to keep less of your money. Under a Trump presidency, the fear of income taxes increasing should diminish. The top federal income tax rate will likely remain at 37%, rather than rising to 39.6% as President Biden has been advocating since 2020.
To review, below are the current federal marginal income tax brackets for single, married, and head of household filers.
The ideal federal marginal income tax rate to pay is up to 24%. At this rate, you’re earning enough to live a good life, but you’re not paying so much in taxes that you are disincentivized to work. Jumping from a 24% to a 32% marginal income tax rate is significant, while offering not much more benefit for the additional income earned.
Americans who make six figures or have the potential to make six figures a year or more, thereby have the incentive to grind it out for four years under Trump. More workers working harder equals greater output, which should like to greater profits, greater consumption, and a stronger economy.
Once again, those who believe higher income and capital gains taxes are coming will be wrong for at least another four years. As a result, the sense of urgency to contribute to a Roth IRA through normal or backdoor channels fades.
Striving for financial independence under Trump
My goal is to re-achieve financial independence by December 31, 2027. This will require me to somehow boost my investments by $1,875,000 through a combination of work and investment returns.
Under Trump, I feel like my probability of reaching my goal has increased from around 50% to 60%. It’s still going to be difficult no doubt. But I’d rather plan, try, and fail than to never plan and try at all.
5) Speculative assets may also get a boost
Consistent with a potential melt-up in the S&P 500, there may be an even greater surge in the most volatile and risky assets such as cryptocurrencies, public and private artificial intelligence companies, and venture capital overall.
Hence, you might consider allocating between 10% – 20% of your investable assets to more speculative investments in case they surge to nosebleed levels once again. With up to a 20% allocation, any outsized gains will significantly impact your overall investment returns. At the same time, if such investments correct by 50%, your finances won’t be devastated.
I’m dollar-cost averaging into an open-ended venture capital product that has a majority of its holdings in artificial intelligence. I’ve also committed capital to a couple of closed-end venture capital funds that will invest in AI. I don’t have the access or ability to pick AI winners, so I invest in various funds to hopefully find these unicorns.
6) Cash will likely be a significant underperformer
If the frenzy in risk assets continues under Trump and interest rates come down, then cash will be a significant underperformer. As a result, you want to put your cash to work, as holding too much cash could make you poorer over time.
There is supposedly a record ~$6 trillion in cash sitting on the sidelines. Stronger consumer and corporate balance sheets since the pandemic began is one of the main reasons why any downturn shouldn’t be as devastating as the one we experienced in 2008-2009.
If the amount of money market fund assets reverts to the level seen before the pandemic, there could be a $2.5 trillion unleashing of cash into risk assets. Even if the money market fund assets revert to the level right before the Fed started raising rates, we’re talking $1.5 trillion in cash looking to find a new home.
Everything Could Be Worse Than Expected Too
There are no certainties when it comes to investing. Despite Trump having an 80% probability of winning, Biden still has a 20% chance. Additionally, even with a 60% chance of a stock market melt-up if Trump wins, there’s still a 40% chance the stock market will either stagnate or decline.
The reality is that whether a Democrat or a Republican is in the White House matters less for your investments than you might think. Historically, the S&P 500 has performed well under both parties. Under Biden, the annualized return has also been over 10%.
Many variables influence the S&P 500’s performance, and the president is not a significant factor. It’s akin to the impact a CEO has on a large company’s performance, but even more diluted.
The CEO of one, a solopreneur, makes a huge difference to their company’s performance. On the other hand, if Tim Cook retired from Apple tomorrow, does it really matter? Plenty of lieutenants can fill his departure. Apple’s share price might actually go up, fueled by hopes of a more visionary and innovative CEO taking his place.
Strategically, to make a top 0.1% income, your goal should be to become a CEO of a large company! You don’t have to take any risks like entrepreneurs, yet you get paid obscene amounts of money for a job that plenty of people can do.
The President Only Plays A Small Part In Your Finances
The biggest factor in your ability to grow your wealth is YOU, not the president. You control your saving rate, work ethic, investment decisions, and career choices, not the president. Don’t rely on having the “right” president to help you achieve financial freedom.
Ultimately, every U.S. President is a patriot who is trying to do what’s best for the most number of Americans. If the President does a poor job, thanks to our democracy, they will be voted out.
The failed assassination attempt on Trump is a good reminder to try to be good to others. Life is precious, yet fleeting. Try to understand other people’s points of view before attacking. Attempt to put yourself in another person’s shoes before judging. We have more in common than we think.
My plan is to put my head down and do whatever it takes to take care of my family over the next four years. Along the way, I will try to help readers achieve financial freedom sooner rather than later, no matter their political affiliation.
Since 2009, I’ve found that people who are more financially secure are nicer and happier, and more good comes into the world as a result.
Reader Questions
What are the chances of Trump beating Biden to become the 60th President of the United States? If Trump wins, how do you anticipate his presidency influencing your investments and overall financial situation? Additionally, what other potential impacts could a Trump presidency have on your finances?
If you have children and debt, getting term life insurance is the responsible thing to do. You never know what might happen. Once my wife and I got matching 20-year term policies through Policygenius in 2022, we felt tremendous relief knowing that if something were to happen to us, financially, things would be okay for our kids.
Please note that I take action and invest in everything I believe in. I don’t always get things right, but I strive to learn from my mistakes and improve. Invest only in what you understand and feel comfortable with. If you can’t explain to your friend or partner why you are investing, don’t invest. There are no guaranteed returns with risky assets.
