@GazD I’m being careful not to jump to any conclusions based on first order thinking. Let me explain with a couple of illustrations.

Example 1: Employment

Employment: mass deportations would reverse one of the biggest recent drivers of GDP growth, immigration. It will tighten the labour market, and might be inflationary. But then again, DOGE is going to lay off many federal workers, who will be available to offset labour market tightness. Assume 11 million "illegal migrants" and 2.2 million non-military Federal workers (excluding US postal workers), as the relevant population bases. Deporting people takes significant institutional capacity, even if money is no object. So in a world where 200,000 incremental deportations occur in year 1, that could potentially be offset by 200,000 ex-federal employees entering the labour force, only 10% of the federal workforce. (Note: the US typically already deports between several hundred thousand and a million people a year. And it sounds like the Dept. Of Homeland security is going to be hiring!)

And of course, if skill gaps appear, then there is the possibility to increase legal immigration. America had been reinvesting for 6-8 years in local manufacturing, which accelerated under Biden. Both sides of politics support legal migration, which has been a foundation of US economic prosperity.

The Trump administration has smart people, who know the effect on inflation. They know how sensitive much of their support base is to inflation. The scale and timing of both deportations, federal firings, and legal immigration are levers under their control. They can offset each other in terms of the impact on the labour market. In theory.

Example 2: Price of goods

We can start by stating simply that tariffs are inflationary. But we still have many of the tariffs in place from Trump 1.0. Furthermore, some have been increased under Biden, including the wide ranging Section 301 tariffs that came into effect in September.

So, what we don’t know is what incremental tariffs will be imposed, when they will take effect, and what conditions will be applied to allow them to be avoided or offset. Conceivably, a Trump 2.0 tariff regime might simply be a new framework within which terms of international trade have to be negotiated?

What might offset the inflationary impact of tariffs? Well, removal of regulations might reduce friction and costs in business. Proceeds from tariffs might be directed to support certain sectors, like "made in America", where a lot of reinvestment has already occurred under Biden. And trade flows might rebalance to goods from lower tariffs jurisdictions in response. Changes in corporate taxes can also affect the system, positively and negatively.

So while it is true that tariffs will be inflationary, the magnitude, timing and potential for offsetting effects are uncertain.

I don’t pretend to know the answers. But an economy is a complex and interconnected system, and there are a lot of levers to be pulled and feedback loops. While I think there are risks, and potential unintended consequences, I think we have to wait and see just what policies get enacted, their extent, and timing.

Trump has been pretty vocal in promising to reduce inflation (even if "drill baby drill" is unlikely to reduce oil prices!) and has said "Promises Made, Promises Kept". Inflation taking off again in 2025 would be the clearest sign of a MAGA failure. Rising interest rates would pitch the Whitehouse into battle with the Fed, and that could affect capital markets in not a nice way! This time around, Trump is likely focused on legacy. Would he really risk wrecking it?

One thing is for sure. 2025 will be interesting. But I’m not making any predictions. My portfolio is diversified, albeit aggressively growth oriented. Diversified by number of holdings, sector exposure, and regional revenue exposure. I think that’s the best I can do.

That sure is a valid question @GazD, although I don't tend to go down that rabbit hole too much as a longer-term investor. My guess would be 90%plus of my portfolios are minimum holding period of 10 years with and large part of this 90% even longer (20 years plus). That is definitely where I have made the majority of my gains. I do have some side dabbles for fun and not large values in small caps and start-ups, where I use my SM portfolio as a test case before jumping into those stocks IRL.

4 years does sound like a considerable time in the market, particularly if it becomes a rapidly changing market as you point out, but I'm probably just as likely to time any change badly or not read the macro tea leaves correctly, meaning I lose my compounding advantage and maybe even some real value in selling/buying/selling buying in 4 years to get back to where I am now. I did something like this with some banking shares I had held for a long period, thinking things were going to get rough for them (seems almost every market forecaster thought the same) only to see them go crazy of late. Still have @MQG and will hang on to them for some time, unless their operational direction changes dramatically.

No doubt I'll still have a play with my smaller investments and the only other major change will be to commence accumulating BTC, which is something I have been procrastinating about for 2 years. No time like the present, current price aside!!

I value your suggestion not to extend first order thinking to investment decisions @mikebrisy and you made a good case for the complexity of economic workings.I also plan to hold my investments for the longterm @lowway and you're right to express the low likelihood of correctly predicting macroeconomic changes AND making the right investment calls based on them...

The linked piece is the kind of way I'm thinking about likely inflation under Trump and to be honest I'm also mindful of @Strawman who has made the point numerous times that the US is debasing it's currency with ever inflating debt (this was set to continue under Democrats or Republicans) I hold bitcoin which is worth ~7% of our investments outside of super and our primary residence and I do see this as a hedge against sovereign currency debasement.

I suppose I worry that we might not only be headed towards short term but possible mid-long term inflation and I found out before that some of my stocks, quality though they were did not perform well in an environment of rising interest rates (primarily high PE stocks but also pre profit stocks).

https://www.piie.com/blogs/realtime-economics/2024/how-will-trumponomics-work-out

I found the NAB had a useful podcast on the subject:

https://open.spotify.com/episode/4ajNIdLnJNK8BLh6gApoMF?si=441e865dcb404016

I'll have to listen to it again as I was driving to Bylong through the Hunter and got a little distracted by the mines and beautiful cliffs!

But from what I could remember...my key takeaway was that there will be nowhere better to invest than the USA!

On the long term inflation risk this was an interesting chat with a brief discussion of the investing implications at the end…

TLDR is own hard assets and bitcoin.

https://podcasts.apple.com/au/podcast/shares-for-beginners/id1451778025?i=1000678478420