The 2025 Theme — Confusion
Author: Greg Valliere
January 6, 2025
THE FINANCIAL MARKETS famously don’t like confusion, but they’re getting a boat-load. On issue after issue, the message from Washington during this holiday season was policy uncertainty.
AT THE CENTER OF THIS CONFUSION ARE FIERCE EGO BATTLES, with Donald J. Trump seemingly unconcerned about the fact that he has made enormous promises that cannot be met. Some examples:
REPUBLICANS IN THE HOUSE were stunned when Trump injected the debt ceiling into the December budget deal. This won’t move for months; it was always considered by the GOP as a bargaining chip to be used later this year.
DIFFERENCES ARE ALREADY CLEAR on tax policy. Most Republicans are adamantly opposed to a tax bill that could cost as much as $4 trillion over ten years. Investors who were counting on a bold tax deal will have to scale back expectations — there isn’t enough money for that.
TRUMP’S PLEDGE TO RAISE TARIFFS will encounter fierce opposition and retaliation from Canada, China and Mexico.
THERE’S BEEN NOTHING BUT DERISION TOWARD Trump’s call for a U.S. takeover of those three countries, yet Trump said during the holidays, ‘I’m not going to stand for high canal fees.”
BUT ON TARIFFS, IMMIGRATION and other hot-button issues, litigation is certain.
TRUMP WILL BEGIN DEPORTATION of immigrants who have been convicted of crimes, which might affect a few thousand people. Meanwhile, a fierce battle continues between Elon Musk and the Trump base over H1-/B visas.
WITHIN TWO WEEKS, A DEBT CEILING BRAWL WILL ERUPT: The Treasury Department has enough accounting tricks to keep the government running into the spring, but a shutdown looks inevitable.
AND GEOPOLITICS WILL HEAT UP, as Ukraine launches a major invasion into Russian territory.
AND CLOSER TO HOME, a major geopolitical issue lurks — the resignation, probably within days, of Canadian Prime Minister Justin Trudeau. This will deprive Trump of a favorite whipping boy, but he has many others.
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