Written by Shane Balkham

Trump’s second term as President of the United States has already proven exhausting for those trying to keep up with his rhetoric and actions. Within the first few days of his presidency, there has been wave upon wave of unilateral actions that represent a significant expansion of White House power to satisfy his supporter base. Some of his policies and reforms will take time and require congressional legislation to enact, but that has not stopped Trump from commanding the spotlight over key areas that brought him back to power.

Nowhere has this display of presidential authority been more prominent than on the topic of immigration, which polls suggest was a significant concern for many voters. Within hours of taking office Trump declared an emergency at the US/Mexico border, allowing him to deploy more US military personnel to the area. He has effectively closed the country to all new asylum-seekers, as well as suspending already approved resettlement flights for refugees.

President Trump also ordered authorities to cease the granting of automatic citizenship to the children of undocumented migrants who are born on American soil. This is arguably one of his most controversial actions and is seen as unconstitutional. Lengthy legal battles will undoubtedly ensue, as well as the potential impact that these policies will have on the US’s economic growth.

While immigration was a prominent issue with voters, it was overshadowed by concerns about the economy and inflation. Trump has focused on energy prices as the key catalyst in bringing down prices of everyday goods and services. He also declared another emergency; the ‘national energy emergency’, which reversed protections for fossil fuel extraction in Alaska and coastal waters that outgoing president Joe Biden had put in place.

The one area that was top of Trump’s list was tariffs, where he pledged to focus on some of America’s biggest trade partners from day one, in order to both protect American industries and generate new revenue to fund his favoured government programmes. It could be a reason why Trump, with his eye on the stock market and economic growth, is treading more carefully when it comes to trade.

However, many have cautioned that tariffs could drive up consumer costs and hurt American businesses that rely on imports in their supply chain. With the Federal Reserve meeting this week, inflation will once again be the hot topic. While the Federal Reserve’s last update in December looked towards having two interest rate cuts in 2025, President Trump declared he knew interest rates better than them.

Fact-checking is becoming important for any rhetoric, as Trump also declared that the recent inflation was probably the highest in US history. In actual fact, US inflation was higher four times during Trump’s lifetime (in the 1940s, 1950s, 1970s, and 1980s). This highlights the importance of the independence of the Federal Reserve, as well as an understanding of inflation which is needed to understand the importance of interest rates.

The markets were mixed last week, with European equities posting the best returns from the major developed markets, while US equities were negative. The MSCI Europe ex-UK index was up +1.3%, with the S&P 500 and Nasdaq 100 down -0.6% and -0.8% respectively, all in GBP terms. The MSCI Japan index also rose, +0.8% in GBP terms, as the Bank of Japan (BoJ) raised interest rates a quarter point, as had been signalled in advance.  The expectation is for one further rate increase this year.

While it is important to monitor the antics of arguably the world’s most powerful individual, it is equally important to ensure you have an appropriate level of diversification, that will allow you to stay invested during these uncertain weeks and months.

 

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 27th January 2025.

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