Tax cuts, tariffs and deregulation will be key focuses for Republican lawmakers next year after President-elect Donald Trump’s decisive victory coupled with Republicans flipping control of the Senate and potentially retaining control of the House.
In the short-term, the Dow Jones Industrial Average shot up more than 1,270 points, or 3%, in early trading Nov. 6, while the broader S&P 500 index and the Nasdaq composite were each up about 2%.
Brian Gardner, chief Washington policy strategist at Stifel Financial, said the fact that the race’s outcome was known quickly is a boon for investors. “We expect the equity markets will see a Trump win as pro-economic growth and will rally on the news,” he said in a statement. “The sectors that could outperform on a Trump win include financials (especially regional banks), cryptocurrency and digital assets, as well as oil and gas. The bond market could sell off on fears of increased deficits and higher interest rates.”
To that end, the 10-year Treasury yield jumped to 4.45% on Nov. 6 after closing Nov. 5 at 4.29%.
As of Nov. 6 at 12:30 p.m. EST, Trump had 277 electoral votes, according to the Associated Press, more than the 270 needed to win. Republicans flipped multiple Democratic-held seats in the Senate to win control of the chamber. Notably, Senate Banking Committee Chair Sherrod Brown, D-Ohio, lost his bid for re-election to Republican challenger Bernie Moreno.
Neither side had won a majority of House seats early on Nov. 6, but the Associated press called 198 seats for the Republicans and 180 for the Democrats.
Tariffs and rates cuts
Trump has called for establishing a universal baseline tariff on all U.S. imports of 10% to 20% and a 60% tariff on all U.S. imports from China.
If implemented, the tariffs will be bad for the fixed-income market because they will lead to increased inflation, according to Andrzej Skiba, head of BlueBay U.S. fixed income at RBC Global Asset Management.
“We’re talking 10% tariffs across all global partners,” Skiba said in a statement. “This is a big deal because this could add 1% to inflation. If you add 1% to next year’s inflation numbers, we should say bye to rate cuts. With higher tariffs, the Fed will not be in a position to cut rates even if the economy is slowing down — and that is a toxic mix for fixed income.”
David Page, head of macro research at AXA Investment Managers, said in a statement that inflation in the U.S. could rise sharply depending on the size of the tariffs. While AXA Investment Managers expects economic growth to remain strong in 2025, it forecasts material headwinds to growth in 2026, Page said.
He added: “We believe that rising inflation will restrict the Fed's space for policy easing. In growing anticipation of a Trump win (and in the light of firmer data), markets had scaled back expectations for Fed cuts to 4% by end-2025 from 3% after the Fed’s surprise 50-basis-point-cut in September.”
It’s widely expected that the Federal Reserve will initiate a quarter-point rate cut at its Nov. 7 meeting.
Taxes
Prior to Election Day, experts had predicted that if there was a Republican sweep with the party taking control of the White House and Senate and maintaining control of the House, they would almost certainly extend key provisions from the 2017 Tax Cuts and Jobs Act. Trump, who signed the bill into law, called for extending the bill’s expiring provisions, which mostly affect individuals, such as increases in both the standard deduction and the child tax credit.
Trump in the campaign also called for further reducing the corporate tax rate to 15%. In the 2017 tax bill, Republicans cut the corporate rate to 21% from 35%.
ESG
Trump has also vowed to cut regulations across the federal government.
Specifically, Republican lawmakers have worked in recent years to prohibit environmental, social and governance investing.
In September, the Republican-led House passed a series of anti-ESG bills that were not taken up by the Democratic-controlled Senate.
If Republicans retain control of the House, anti-ESG bills are likely to pass, sources said prior to Election Day.
That includes overturning a 2022 Department of Labor rule that permits ERISA fiduciaries to consider ESG factors when making investment decisions.
Republican lawmakers passed a bill in September that reverts regulation back to a Trump-era Department of Labor rule that stipulated that ERISA plan fiduciaries cannot invest in "nonpecuniary" vehicles that sacrifice investment returns or take on additional risk.
In a statement following Trump’s win, Maria Lettini, CEO of US SIF: The Sustainable Investment Forum, said the investment community’s role in creating a sustainable and resilient economy has never been more important. “Investors require transparency through clear reporting requirements, the ability to engage the companies they own on financially material issues and certainty that policymakers will support robust climate action,” she said. “That remains true regardless of the political landscape. We commit to working with the next administration and other newly elected officials across the United States to advance a more just and sustainable American economy.”
Cryptocurrency
Trump was once a skeptic of cryptocurrency, but this year he promised to be more welcoming to digital assets than the Biden administration. Crypto stakeholders have criticized Securities and Exchange Commission Chair Gary Gensler’s “regulation by enforcement” approach to the industry.
Bitcoin jumped to a fresh record Nov. 6 after Trump’s win as crypto industry leaders celebrated.
Some of the sector’s largest companies and wealthiest entrepreneurs, including Coinbase Global, the Winklevoss twins and Ripple Labs, poured unprecedented amounts of money into the race. Fairshake, a pro-crypto super PAC, spent more than $180 million on ensuring candidates who supported the industry would secure their place in the Senate and House.
“We are on the brink of a new American Renaissance,” said Tyler Winklevoss, co-founder of crypto exchange Gemini Trust Co., in a post on X on Nov. 6.
