Trump inheriting fiscal gauntlet
Published On Jan 22, 2025, 7:00 AM
Donald Trump is facing a significant fiscal challenge as he enters his second term. The Congressional Budget Office (CBO) projects a $1.9 trillion budget deficit for the 2025 fiscal year, largely due to elevated government spending and a national debt exceeding $36 trillion. Trump aims to tackle these issues through a continuation of the 2017 Tax Cuts and Jobs Act, which may temporarily reduce the deficit before it rises again. However, ongoing spending commitments, particularly for Social Security and Medicare, may make long-term fiscal stability difficult to achieve.
Stock Forecasts
SPY
Negative
Given the projected budget deficit and rising national debt, there may be heightened volatility in the financial markets. Investors may respond negatively to fiscal instability, particularly in sectors sensitive to government funding and interest rates.
XLI
Positive
If Trump successfully implements policies to make the 2017 tax cuts permanent, there could be some short-term boosts in sectors such as consumer spending and manufacturing. However, sustainable growth may still be hindered by the underlying fiscal challenges.
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