Navigating the Stock Market Ahead of the 2025 Presidential Inauguration: Insights from a Certified Financial Planner

As the 2025 U.S. presidential inauguration approaches, the political landscape is in a bit of flux. Investors are keenly watching to understand how this transition might impact the stock market and their portfolios.  

While political change often brings uncertainty, it also presents opportunities for those who are prepared. A great way to gear up for this uncertain time is to explore how past trends, current market conditions, and potential policy shifts might influence the stock market in the lead-up to the inauguration and beyond.  

Historical Market Trends Around Presidential Inaugurations  

Stock market performance around presidential inaugurations has historically been influenced by the incoming administration’s policies and market expectations. In past transitions, we’ve seen patterns of increased volatility due to uncertainty about how new leadership might reshape fiscal, regulatory, and trade policies. The market tends to react negatively to uncertainty, which can often be triggered by a new presidential administration full of unknowns.  

For example, when President Biden took office in 2021, the market experienced some initial fluctuations, but it generally trended upward in the weeks following the inauguration. However, this trend is not always guaranteed—market movements can vary based on the specifics of the administration’s priorities and the broader economic backdrop.  

Current Market Landscape  

As of early 2025, the stock market has shown signs of hesitation. The much-anticipated “Santa Claus” rally—where stocks typically perform well during the end-of-year holiday season—has ended with a 0.53% decline in the S&P 500. Investors are now looking at the “January Barometer,” which suggests that stock performance in January may set the tone for the rest of the year.  

Recent economic indicators are also mixed. Inflation remains elevated, though slightly below 2024’s peak, and job growth continues to be strong. However, concerns about slowing GDP growth and potentially fewer rate cuts in 2025 by the Federal Reserve are creating uncertainty. Federal Reserve Chair Jerome Powell recently hinted at just two rate cuts in the coming year, down from an expected four cuts previously communicated. Just last week, following the higher-than-expected December jobs report, stocks dipped as expectations of possibly only one rate cut in 2025 grow.  

Anticipated Policy Changes Under the New Administration  

Trade Policy  

Trump is likely to continue prioritizing trade policies that protect U.S. industries, reintroducing tariffs on countries like China, Canada, and Mexico, and renegotiating trade deals. This could lead to short-term market volatility, especially in sectors like technology, manufacturing, and agriculture that rely on global supply chains.  

Encouraging companies to bring manufacturing back to the U.S. might benefit domestic manufacturing stocks but could raise costs for companies dependent on imported materials.  

Regulatory Policy  

Trump will likely focus on deregulation in key industries, including energy, finance, and healthcare. This could boost profits for companies in these sectors, particularly oil & gas and financial services, which could lead to potential stock gains. Less regulation might also benefit smaller businesses and tech firms by lowering compliance costs, potentially fueling market optimism.  

Easing environmental restrictions could be positive for traditional energy stocks (e.g., oil and gas), but renewable energy firms might face headwinds, as government support for clean energy could decrease.  

Fiscal Policy  

Trump is expected to push for further tax cuts, building on the Tax Cuts and Jobs Act of 2017, which significantly reduced corporate tax rates and personal income taxes. Additional tax cuts or an extension of the TCJA (set to sunset at the end of 2025) for businesses and individuals could stimulate consumer spending and corporate profitability, leading to higher stock valuations, especially in consumer discretionary and retail sectors. Lower corporate taxes would also benefit large corporations, boosting earnings per share and driving stock market growth.   

Increased spending on infrastructure could positively impact stocks in construction, materials, and industrials, as federal funds flow into major projects. However, this could also lead to higher government deficits, which create inflationary pressures over time, potentially affecting interest rates and bond markets.  

Market Impact Summary  

Sectors like energy, manufacturing, financials, infrastructure, and consumer discretionary are likely to benefit from deregulation, tax cuts, and infrastructure spending. However, trade tensions, particularly with China, could create uncertainty for sectors reliant on global trade, including tech and manufacturing. Additionally, increased spending without offsetting revenue may raise concerns about the fiscal deficit, potentially leading to higher long-term interest rates, which could weigh on broader market valuations, especially for growth stocks.  

Trump’s expected policies on trade, deregulation, and fiscal matters could significantly impact the stock market. His “America First” trade agenda, including potential tariffs and incentives for domestic manufacturing, might create volatility in global supply chain-dependent sectors like technology and manufacturing. Deregulation, particularly in energy, finance, and healthcare, could boost stock performance in these industries. Tax cuts and infrastructure spending could stimulate consumer and business growth, benefiting sectors like construction and consumer goods, though rising deficits may introduce long-term risks.  

While the current political climate raises the potential for increased short-term market volatility, history tells us that very few presidential terms come to a close with an overall decline in stock prices. Equity investing remains a vital component of a diversified long-term investing strategy. Studies show that “time in the market” is a more effective strategy than “timing the market.” While no one can have a crystal ball, being well-informed on the changes in the market can help you make wise decisions when it comes to investing in your portfolio.   

Talk to the Experts 

If you have further questions, contact the experts at Maner Wealth today at maner@manercpa.com or by call us directly at 517-323-7500 to discuss in more detail what the potential changes to the market could mean for you and your investment strategies.