Even by Washington standards, the second Trump presidency began in a frenzy. It embraces mass shootings at federal agencies, tariff threats on allies and enemies, and how to get Republican budgets through narrowly divided Congress.
Business leaders and business investors are sure things will work, at least for them. “The market hasn't shown much concern,” said Jason Pride, chief of investment strategies and research at Glenmede Trust Company.
However, it could change and affect the high stakes on the market and the US economic outlook.
Investors are fully hoping that the tax cuts from President Trump's first term will benefit most businesses and the wealthy, and will be fully extended by the end of the year. Trade groups, including Business Roundtable and the National Association of Wholesalers, are confident that the extension will be processed.
Still, arithmetic remains tenuous. The cost of extending the tax cuts totals $4 trillion over a decade. This means that Congress is left to barter other things that can save or collect funds, which could potentially cut its federal benefits.
The bond market, where traders price the risk of both inflation and economic downturns, has in that aspect avoided the worrying moment brought about by Trump's boomeranging tariff style. The bet is that the import tax threat is a more geopolitical tool than a major revenue laser, as the administration portrays tariffs in its budgetary debate.
Some of the underlying calm comes from Wall Street's confidence in Treasury Secretary Scott Bescent. Before assuming a new position as a billionaire hedge fund manager, he believes many analysts will benefit from the ultimate policy suite coming from the White House, and will be able to “more” in future budgets. Added to optimistic optimism about the low deficit,” according to Matt Lutzetti, chief economist at Deutsche Bank.
That optimism recently declares Becent's goal of making Trump's 2017 tax cuts permanent, as well as social insurance programs where much of his political foundation relies on Social Security, Medicare, Medicaid and more. It's difficult to square Becent's goal of doing so. Do not cut as part of your cost reduction measures.
Republican lawmakers and eight House members, including Missouri Sen. Josh Hawley, reflect their position. Others want more spending cuts on the table. However, it is unclear which legislative proposal will ultimately take priority, as the majority of Republicans in each chamber of Congress are only a few votes.
Many early topics about savings costs have been concentrated on government efficiency, or Doge, an initiative led by Elon Musk, restructuring the federal bureaucracy.
For many people in the business world, including Airbnb co-founder and Palantir chief executive, Musk's cost-cutting campaign offers the prospect that sources of large-scale waste and fraud have been unearthed previously I will. Tax reductions in future budget calculations.
Trump and Musk say cost-cutting efforts can save on the collateral. However, a New York Times analysis of Doge's $55 billion savings claimed, found that mathematics was damaged by accounting errors, false assumptions, outdated data and other mistakes.
“Over 90% of government spending is fairly limited as they fall into the categories of non-judgment, interest and defense spending to effectively reduce the deficit without increasing taxes,” BlackRock's lead said. said David Rogal, portfolio manager.
Several conservative think tank analysts have criticized Musk for misleading both voters and businessmen about where the majority of federal spending is.
“Unless you're focused primarily on the majority of budgets spent primarily on Social Security, Medicare, Medicaid, defense, veterans and bondholders,” Jessica said. Riedl is a senior fellow at the Manhattan Institute at the right field. “We certainly trim the rest, but the real money is in them.”
Glenmed's Pride said expiring tax cuts this year could weaken economic growth. But he also said that Trump and Bescent's “option 2″ — a major budget cut — would have similar economic impacts through different channels as governments spend directly on the economy.” .
Many economists have the potential impact on household health care and food security, with the hundreds of millions of dollars of spending cuts proposed by some members of Congress (a heavily layoffs in the federal workforce) We believe it could slow employment growth and retail sales. .
Business Community Group has been arguing for decades that federal deficits can and should be addressed by reducing spending, rather than by greater tax revenue.
What's new is that as the population ages, mandatory spending on old age insurance has skyrocketed. Military budgets and federal profit payments to bondholders continue to increase.
On the campaign trail, Trump made a series of populist tax promises to voters. The pledge to stop taxation tips and overtime salaries, lower taxes for companies that manufacture products domestically, and eliminate taxes on Social Security payments has earned a wave of general support. However, these initiatives appear to have fallen off many of Congress' priority lists by reducing tax revenue by about $1 trillion.
The White House and its allies say “There are many spending and tax cut ideas, there are few flexible, giftless, no optional payments,” says Stanveger, an economist and senior fellow at the right-leaning American Enterprise Institute. states.
“At the end of this process, whether it's June or December, there's a number and number fud,” said Kim Wallace, senior managing director of research at 22V, an investment strategy company that leads the Washington policy risk team. , Congress has conflict between experts and experts from the nonpartisan committees of Congress officially “scoring” revenues and “score” spending.
Such conflicts can surprise the market. However, the majority of Wall Street economists, government analysts and wealth managers believe that budget mathematics can be grasped from notes shared with clients on television.
“It is difficult to meet the various objectives of the administration through these policies (lower deficits, lower taxes, strong growth, etc.),” ​​said Luzetti, Deutsche Bank. “One approach is probably the most possible option. It's probably more likely, but it's about shortening the timeline for tax cuts.”
That would mean “in the short term it means more tax cuts, but with fewer sticker prices.”
This is done through expectations from corporate America that the tax cuts will not expire, but will be extended again in later years and added to the deficit.
However, the market focuses most on medium-term inflation and interest rate pathways. Traditionally, economists and business leaders view tariffs as inflation. This is because businesses are usually trying to pass the cost of tax to consumers.
But Becent said he felt confident that inflation expectations remain tame and that certain tariffs would spur “one-time changes in price levels” and that it would not continue to promote inflation. It has been announced. A major Federal Reserve official.
Trump recently announced plans for “mutual” tariffs on all his trading partners. This is still a global trade that is turbulent, along with taxation on steel and aluminum imports and unresolved threats to Canada and Mexico.
However, bond investors appeared to be relieved by the lack of details of the declaration. The president then indicated that no mutual measures would be enacted by early April.
