CAISSA analyzes global events monthly, assessing their potential influence on our client’s wealth plan. We are diligently having strategic discussions with our portfolio managers, ensuring that our position remains informed and aligned with current market dynamics.

Below, you will find CAISSA’s perspective on key topics markets are digesting post election.

Potential to Extend Tax Cuts and Stimulate Growth 

Extending the 2017 tax cuts could boost economic growth, potentially benefiting stocks, though it may also lead to larger budget deficits, driving up long-term bond yields.

CAISSA Perspective: If tax cuts are extended, we anticipate positive effects for equities as companies may reinvest tax savings into growth initiatives. However, fixed-income investors should be prepared for potential yield increases as deficits grow, which may affect bond prices. In this environment, our focus will be on balancing portfolios to capture equity growth while managing bond exposure to mitigate interest rate risk. 

Impact of Trade Shifts and Higher Tariffs

Potentially higher tariffs, especially on Chinese goods, may encourage U.S. production but could also increase costs, contributing to inflationary pressures. 

CAISSA Perspective: Companies with diverse or localized supply chains are positioned to handle tariff impacts more effectively, while those solely dependent on imports may face rising costs. Investing in sectors that emphasize domestic production or that have greater flexibility to adapt could provide a buffer against tariff-induced price increases. Rising tariffs and related inflation could also affect commodities, as increased costs flow through supply chains, potentially increasing raw material prices. 

Regulatory Revisions in Energy and Environment

Expected shifts in energy and environmental regulations may benefit traditional energy sectors while adding new compliance demands for others. 

CAISSA Perspective: Policy changes in energy regulation may reduce costs for traditional sectors, like oil and gas, which could lead to increased production capacity and profit margins. However, sectors with high compliance requirements, especially in renewable energy and utilities, may experience cost pressures due to these changes. As other areas may face rising compliance costs, particularly in environmentally regulated industries, we’ll be selective with equity exposure and consider diversifying into infrastructure assets and high-quality bonds to manage volatility and capture potential upside in sectors less affected by compliance costs.

Domestic Job Growth and Supply Chain Considerations

Stricter trade policies may increase domestic job creation but could drive wage inflation and production costs amid labor shortages.

CAISSA Perspective: Firms that have diversified supply routes or shifted to onshoring may find a competitive edge if labor costs increase due to domestic production demands. Companies focused on long-term supply chain resilience, including those leveraging East and West Coast port diversification, could be well-positioned. For investors, this may mean looking to sectors prioritizing onshoring or regional supply networks, which may weather trade disruptions and benefit from potential government incentives for domestic production.

Increased Market Volatility Amid Policy Changes

Evolving economic policies may increase market volatility as investors adjust to new changes in the landscape. 

CAISSA Perspective: Periods of heightened volatility offer opportunities for long-term investors to enter equities at attractive valuations while managing downside risks. We’re carefully monitoring market shifts to capture growth in asset classes benefitting from new policies while adjusting fixed-income allocations to manage potential interest rate movements. A diversified portfolio across equities, fixed income, and alternative assets will be essential in navigating a changing policy environment, capturing gains, and safeguarding against volatility.