After 25 years, Trump is about to take office. How will Wang Junlin lead the US stock market to start a year of "cheating"?

The year 2024 is coming to an end. In 2025, the US will usher in a brand new political situation - Donald Trump will be re-elected as president and will officially take office on January 20, 2025. This controversial former president has once again gained the support of voters in this election, vowing to quickly implement a series of comprehensive reform measures on his inauguration day, including deporting millions of illegal immigrants, imposing tariffs on imported goods that may push up US consumer prices, and pardoning rioters who tried to overturn his failed re-election result in 2020. These policy proposals have not only attracted a large number of supporters, but also caused widespread market attention and uncertainty.

Six weeks before taking office, Trump appeared more confident after his election victory last month. He will become the second US president to win non-consecutive terms since Grover Cleveland in the 1890s.

Trump’s inauguration has not only attracted widespread attention in the political field, but also caused new waves in Financial Marekt, especially in the US stock market. So, as investors, what do we need to pay attention to the most in 2025? There are many answers, but without a doubt, Trump’s re-inauguration will be one of the most important factors in our investment decisions. Today, we will delve into the potential impact of Trump’s inauguration on the US stock market.

The “roller coaster ride” of the US stock market during Trump’s previous term

Looking back at Trump’s previous term (2016-2020), the US stock market can be said to have experienced a thrilling “roller coaster ride”. When Trump was elected in 2016, it was like a heavy bomb, instantly breaking the market’s original calm. That night, the US stock market plummeted in the night session, falling more than 5% at one point, even triggering the night session circuit breaker mechanism. The market regarded his election as a Black Swan event, full of uncertainty and panic about the future.

However, a dramatic turning point followed. The next day, the market inexplicably rose, and investors seemed to instantly realize that instead of worrying about the many uncertainties in the future, it was better to seize the immediate good news - tax cuts. Trump had already thrown out a powerful tax cut plan during the campaign, claiming to significantly reduce the corporate tax rate from the then 35% to 15%. Although this plan was not initially valued by the market, with his successful election, the expectation of tax cuts was like a tempting “pie” hanging high in the market, continuously teasing investors’ optimism and becoming one of the important forces driving the stock market up.

However, the road to the implementation of tax reduction policies was not smooth sailing. From the first proposal in September 2016 to the formal drafting of the tax reduction bill on November 2, 2017, there were internal differences of opinion within the Republican Party, which took up to a year. After submitting it to Congress, it was strongly opposed by the Democratic Party, with Democratic Party whip Pelosi accusing it of being a welfare for the wealthy. Even more unexpectedly, 12 Republicans defected in the House vote, causing the bill to be difficult to pass. In the end, Trump had to compromise and increase the tax cut from 15% to 21%. Fortunately, on January 1, 2018, the tax cut bill was passed by a narrow margin of 51 to 49, which relieved the market and ushered in a strong rise. This process fully demonstrated the struggles and twists and turns in the process of policy implementation, and also made investors aware that while paying attention to policy benefits, they must also be vigilant about the variables in its implementation.

During the same period, Trump’s deregulation policy also had a profound impact on the US stock market. After the 2008 financial crisis, the US government imposed strict regulation on all industries, especially the banking industry, in order to remedy the situation. The Obama administration, which was ruled by the Democratic Party, kept up the ante, making US companies suffer. On the day of Trump’s inauguration, he announced restrictions on regulatory policies, requiring the addition of one regulation to be reduced by two. The original intention was to limit the increase in regulation, but it unexpectedly evolved into a significant deregulation. In 2017, the number of deleted clauses reached 22 times that of newly added clauses, allowing companies to relax. This year, the performance of US Listed Companies has significantly improved. Traditional industries such as finance, industry, and healthcare have seen good profit growth, with the financial sector leading the way, with a year-on-year increase of up to 50%. Morgan Stanley stated at the end of that year that this bull market was entirely due to Trump’s deregulatory policies. Now that Trump is back in office, deregulatory policies are expected to exert force again. For traditional sectors such as finance, industry, healthcare, materials, and the AI industry, this is undoubtedly a great benefit. Companies will have more freedom to expand their business and pursue innovation, which is expected to bring structural profit growth.

The trade war is undoubtedly one of the most influential and nerve-wracking events during Trump’s previous term. In 2018, the smoke of the trade war filled the entire year, almost dominating major news. Its significant impact on US stock prices is still vivid in our memory. At the beginning of that year, Trump announced tariffs ranging from 30% to 110% on imported washing machines, photovoltaic products, and sewage pipe fittings, targeting rival countries. Concerns about the trade war suddenly arose, coinciding with the Federal Reserve’s preparation to raise interest rates, and the US stock market experienced a 10% correction. On March 22nd, Trump signed a presidential memorandum deciding to impose tariffs on $60 billion worth of goods from the opponent country. The opponent country immediately fought back strongly, causing the US stock market to fall by more than 2% for two consecutive days. Subsequently, it experienced a correction of about 8%, and the trade war officially began. In the following two years, the two sides came and went, imposing tariffs multiple times without giving in to each other. During this period, the Meng Wanzhou incident pushed the tense situation to a climax, and the market panic reached its peak. In December, the US stock market fell almost every day, and the market plummeted from 2800 points to 2350 points, a 16% drop in a month. Since Trump announced tariffs on 200 billion goods from rival countries in September, the US stock market has fallen by more than 20%, falling into a technical bear market.

Looking back at the entire process of the trade war, the key to market reaction lies in the countermeasure of the opponent country. Although Trump’s tariff policy is indiscriminate, the toughness of the opponent country’s attitude and the degree of countermeasure directly determine the degree of market panic. Although the trade war has brought many twists and turns and corrections, from historical experience, the US stock market has shown a typical V-shaped pattern after each decline. Behind this is the market’s belief that differences will eventually be resolved through negotiations, which also provides investors with bottom fishing opportunities. Now that Trump has taken office again, tariff policies are likely to make a comeback and may become more severe, not only targeting opponent countries, but also affecting more countries. This will undoubtedly bring greater volatility risks to the US stock market, but it also hides a good opportunity for bottom fishing. Investors need to be vigilant at all times and seize the opportunity.

Macro outlook for the US stock market in 2025

Looking ahead to 2025, the US stock market will present a complex and opportunistic development trend under the interweaving of multiple factors such as macroeconomics, Trump’s policies, and emerging technologies (such as AI).

From a macroeconomic perspective, in the past three years, the US macro economy has been the most core factor affecting the US stock market, from inflation to recession, and then to the Federal Reserve’s Monetary Policy, all of which affect the market’s sensitive nerves. However, as we enter 2025, the situation seems to have changed. The inflation indicator PCE has been steadily declining in the past year, with the latest data falling to 2.4%, close to the Federal Reserve’s target of 2%. With the continuous decline in rent inflation, the downward trend of PCE inflation is obvious. The unemployment rate has steadily declined after peaking at the end of the year. Although there has been a small rebound recently due to short-term factors such as weather and corporate wait-and-see before the election, it is expected to resume its downward trend in the future. In terms of retail consumption, it has basically recovered to the pre-epidemic level. Holiday consumption data shows a high enthusiasm for consumption, accounting for more than 70% of the US GDP, which fully demonstrates that the current economic growth of the US is relatively strong. Overall, the downside risk of the US macro economy in 2025 is limited, and the risk of recession is gradually eliminated, but the upward momentum is not strong, and it is in a smooth transition state. Against this backdrop, the decisive role of the macro economy in the US stock market may gradually weaken, and it is more of an observation indicator. As long as there are no major problems, it is difficult to cause market volatility like in the past three years.

The closely related Federal Reserve Monetary Policy is also facing a role change. In the past, every move of the Federal Reserve could cause waves in the US stock market. For example, this week’s Fed meeting hinted that the number of interest rate cuts may be reduced from six to two in 2025, which triggered the second worst decline in the US stock market this year. However, a deeper analysis of the underlying logic reveals that this decline may be the last event that causes such high panic for the Federal Reserve. As early as before the Fed meeting, the market had predicted a decrease in interest rate cuts, and the Fed’s statement this time only confirmed expectations. In fact, a decrease in interest rate cuts is not a bad thing, the key is the reason. If there is a rebound in inflation, it is indeed a cause for concern; but if it is due to a strong US economy or an increase in neutral interest rates, the market does not need to panic. Looking back at 1995, the Federal Reserve only symbolically cut interest rates twice, 50 basis points, after controlling inflation. At that time, the US stock market still performed well from 1995 to 1998, supported by the booming economy and the increase in corporate profits. Today, in 2025, the US economy is still strong, corporate profits continue to grow, and the suspension of interest rate cuts by the Federal Reserve is actually beneficial to the healthy development of the stock market. Its importance is gradually decreasing, and the market focus is shifting from whether to cut interest rates to whether corporate profits can steadily increase. Investors should be aware that the volatility in stock prices due to the Federal Reserve’s Monetary Policy could be a rare buying opportunity.

Trump’s policies: Key variables affecting US stocks in 2025

However, the relative stability of the macro economy and the Federal Reserve’s policies does not mean that the US stock market will be calm. Trump’s election will undoubtedly become a key variable affecting the trend of the US stock market in 2025.

As mentioned earlier, Trump’s key policies affecting the US stock market are mainly three: tariffs, tax cuts, and deregulation. In terms of tariff policies, given the characteristics of the US democratic system, most policies require approval from Congress, but policies involving US national security or foreign affairs can be directly decided by the President without Congress. Therefore, Trump’s tariff policy may be implemented very quickly, and the scope and intensity should not be underestimated. Compared with the previous term, this tariff policy not only has a higher tax increase and a wider scope, but is likely to cause greater volatility in the US stock market. Taking history as a mirror, investors must always be prepared to deal with risks. However, it should also be noted that although the trade war brings panic, it is essentially a short-term risk. The market always believes that negotiations can resolve differences. The V-shaped rebound of the US stock market after the correction during the past trade war is an example. When controlling risks, investors should not miss the opportunity for bottom fishing.

The impact of tax reduction policies is relatively direct. After the last tax reduction took effect, the US government reduced its annual tax revenue by about $100 billion, which directly translated into profit growth for US companies. Although it is difficult to implement this tax reduction policy in the short term, before it is implemented, the expectation of tax reduction will continue to inject positive momentum into the market, like a high-hanging “bait”, attracting investors to enter and pushing up stock prices.

The deregulation policy may be the biggest benefit that is underestimated by the market. In 2017, the deregulation policy achieved an unprecedented bull market in the US stock market, with the financial sector rising by as much as 50% throughout the year. Now that Trump is back in office, deregulation is expected to make another effort. After breaking free from regulatory constraints, companies will dare to take risks and innovate, whether it is to develop new businesses, acquire new companies, or carry out internal restructuring and reform, which will bring structural profit improvement, and this impact will be far-reaching and lasting. For sectors with strict traditional regulation such as finance, industry, and healthcare, as well as emerging fields such as AI and digital currency, deregulation will release huge development potential. Taking China Concepts Stock as an example, 20 years ago, Alibaba, Tencent and other China Concepts Stocks were at their peak, with market values comparable to Microsoft and Apple. However, they later encountered regulatory pressure, causing their stock prices and development to plummet, which shows the influence of regulation. On the contrary, deregulation will loosen the constraints on enterprises and help them take off. Although Wall Street is difficult to quantify its specific impact, it will undoubtedly become the most surprising upward force in the US stock market in 2025.

In addition to the key variable of Trump’s policies, the development of AI technology in 2025 will also add a bright spot to the US stock market. Unlike in the past, this year’s AI is no longer an exclusive benefit for a few companies, nor is it just a concept speculation. It is about to usher in real performance improvement and is expected to become a key starting point for the development of the entire industry. AI technology will widely penetrate various fields, from technology to finance, from medical to industrial, promoting enterprise efficiency improvement, product innovation, and then translating into revenue growth. For investors, exploring investment opportunities in the AI industry chain will become a key part of obtaining rich returns in the US stock market in 2025.

How should investors respond as 2025 approaches?

In summary, the US stock market in 2025 will face many challenges and unprecedented opportunities under the background of Trump’s upcoming presidency. The smooth transition of the macro economy and the role change of the Federal Reserve’s policies provide a relatively stable environment for the market. Trump’s tariffs, tax cuts, and deregulation policies will not only bring volatility, but also stimulate market vitality and create investment opportunities. The booming rise of AI technology has injected new growth momentum into the US stock market. Investors need to closely monitor policy dynamics, macroeconomic data, and technological development trends, flexibly adjust investment strategies, in order to reap rich rewards in this Capital Markets feast and achieve steady wealth growth.

In addition, besides studying the logic of the market, it is also important to choose a suitable investment platform. Here we need to choose a more credible securities firm for investment. For example, Jiaxin Wealth Management is a globally renowned investment securities firm. By opening an account with Jiaxin Wealth Management, you can get a bank account with the same name. You can deposit digital currency (USDT) into the multi-asset wallet BiyaPay, and then withdraw fiat currency to Jiaxin Securities for investment in US stocks. Of course, the user page can directly search for US stock codes on BiyaPay for purchase. At the same time, investors can monitor stock prices regularly according to their investment strategies and buy or sell stocks at the appropriate time.

In the future investment journey, we need to continue to pay attention to the dynamic changes of various factors. For example, the specific direction of the trade war, the details of the implementation of tax reduction policies, the implementation of deregulation policies, and the breakthrough progress of AI technology will all have a profound impact on the US stock market. At the same time, external factors such as the international political situation and the global economic recovery trend may also be intertwined with the domestic situation in the US, jointly shaping the future pattern of the US stock market. Only by maintaining keen market insight, solid professional knowledge, and calm investment mentality can investors ride the wind and waves in the complex and ever-changing US stock market in 2025 and sail towards the other side of wealth appreciation.