Trump 2.0: Citi breaks down expectations for economic system and inventory market

Investing.com — As Donald Trump begins his second time period as President, Citi analysts have outlined a fancy and unsure outlook for the U.S. economic system and world markets in 2025. 

Whereas the U.S. economic system stays strong, Trump’s insurance policies might introduce a mixture of favorable and adversarial shocks, Citi mentioned in its be aware this week.

The U.S. economic system, already the best-performing amongst main developed markets, has been buoyed by sturdy shopper resilience and a sturdy company sector. 

Nevertheless, Citi notes that Trump’s agenda, together with potential tariff hikes, prolonged tax cuts, deregulation, and immigration curbs, might create new uncertainties. 

“Our expectations for Trump’s insurance policies add as much as an advanced mixture of favorable and adversarial provide shocks and demand shocks,” Citi mentioned.

Tariff insurance policies are mentioned to be a key concern. Citi’s baseline assumes a 5% rise within the U.S. efficient tariff fee, together with a 10-15% improve on Chinese language imports. 

Nevertheless, Trump has floated the potential for extra extreme measures, corresponding to a 60% tariff on China or across-the-board tariffs. Whereas such measures might hurt the U.S. economic system and fairness markets, Citi believes these threats could function leverage in negotiations.

For monetary markets, the impacts will differ, in line with the financial institution. Citi sees restricted results on U.S. equities below focused tariffs however warns that broader measures might stress company margins. 

They be aware that worldwide markets, significantly in Europe and China, might face sharper hits. U.S. yields, which have risen on considerations about deficits and inflation, might climb greater.

Uncertainty is anticipated to outline Trump’s presidency. “Trump appears to thrive in a world of ambiguity,” Citi remarked, including that nimble buyers centered on financial fundamentals are greatest positioned to navigate 2025. 

As world tensions rise, from tariff battles to geopolitical pressures, Citi advises staying alert to Trump’s unpredictable strikes and their far-reaching implications.