Timing is everything…

What a difference a month makes! This time last month, the US stock market was hitting all time highs. Now the market is in a correction (down more than 10%).

I try to avoid talking about politics—this is a personal finance blog, after all! However, there are times when politics has such a big impact on markets that I have to talk about it.

Trump’s policies were expected to lift the markets leading people to take the markets to all time highs in February. But now, markets have declined significantly. The reason? Timing.

Timing is everything

Not all policies can be implemented immediately. Some changes can be enacted quickly by the President, while others require time and must go through Congress.

Trump had a lot of policies, some of which are being implemented immediately while others will take time to implement.

As it happens, the policies that are quicker to implement are the ones dragging the market down, while the policies that could benefit the markets are coming later.

Current Trump Policies

People argue about tariffs – are they good policy or not. One thing that cannot be argued, though, is that tariffs are bad for the markets.

Tariffs on major trading partners, including China, Canada, EU, and Mexico, have thrown uncertainty into global supply chains, making companies and investors nervous. Markets don’t like uncertainty.

Additionally, tough-on-immigration policies and geopolitical unpredictability have added layers of economic anxiety.

Lastly, DOGE is implementing large scale cuts. While the government budget is out of and and need to be reduced, in the short run these cuts lead to a slowdown in economic activity and further add to uncertainty.

Future Trump Policies

While tariffs, trade tensions, etc. are causing short-term uncertainty, Trump’s other policies like deregulation and corporate tax reductions will help markets in the long run.

Reduction and simplification of regulation is good for business. It increases profits, which ultimately drives up stocks.

Tax reforms and extension of tax cuts is good for both companies and individuals. Additionally, incentives for domestic investment will help drive more local business activity.

However, implementing these policies takes time. And their impact will not be felt for some time.

Final Thoughts

On balance, people predict that Trump’s policies will help the economy. However, the timing is the issue.

The policies that are being implemented now are negatively impacting the market. The market’s only hope is that the future policies like deregulation and tax cuts get implemented soon. Otherwise there is a risk that the current policies end up breaking something and throw the economy in a recession.

Here’s to hoping that we don’t end up in a recession. Have a good weekend…