Donald Trump’s election provides an excellent opportunity to examine the distinction between what wealthy people desire and what constitutes a thriving economy.
The stock market, which is where the wealthy live, has been rising since Election Day. The Dow rose 3.6 percent on November 6, the day Trump was declared the winner; the S&;P 500 posted its largest gain in two years; and the world’s ten richest people, nine of whom live in the United States, saw their wealth increase by a combined $63.5 billion.
The S&P 500 rose 5.7% in November. Stocks fell in December after the Fed signaled that it would slow rate cuts, but as of December 18, U.S. equities were still up 29 percent for the year.
However, the economy is beginning to falter. The Fed pushed back future rate cuts because Trump continues to threaten to impose tariffs on every possible import. On Friday, Trump boasted on Truth Social: “I told the European Union that they must make up their massive deficit with the United States by purchasing a large amount of our oil and gas.
Otherwise, it’s tariffs all the way!” The United States is already the EU’s largest oil exporter, and the European Commission has proposed buying more liquefied natural gas from the United States. So it’s possible that Trump is simply trying to take credit for something that is already happening. But if Trump wants to push the EU even further, he could spark a trade war.
Everyone knows Trump is all about reviving American manufacturing. However, the National Association of Manufacturers, whose president, Jay Timmons, praised Trump in 2017 as “a true champion for our industry,” predicted in a post-election survey that capital investment would grow only 1.6 percent by 2025.
“That’s not particularly robust,” Timmons told Bloomberg’s Mark Niquette. Another manufacturing trade group, the Institute for Supply Management, predicted a stronger 5.2 percent increase in December.
However, this is in contrast to a 5.6 percent increase this calendar year, when, as Niquette noted, high interest rates hampered investment.
Vanguard is an investment management firm, so it is associated with the wealthy rather than the economy. However, in addition to forecasting market trends, it forecasts genuine economic trends, and late last month it announced that gross domestic product growth, which had been 3 percent or higher under President Joe Biden’s allegedly ruinous economic policies, would fall to 2.7 percent next year under Trump.
And that’s assuming Trump is mostly making up stories about tariffs and a mass roundup of immigrants. According to Vanguard, if he isn’t blowing smoke, GDP growth will be closer to two percent.
Like the Fed, Vanguard is concerned that Trump’s trade policies will raise so-called “core” inflation, which is inflation minus volatile food and energy costs.
On Friday, the Commerce Department’s personal consumption expenditures index, which the Fed and Vanguard prefer to the Labor Department’s consumer price index, showed core inflation at 2.8 percent in November, unchanged from October.
Trump promised in July that if he was elected, “inflation will vanish completely.” However, Vanguard predicts that “inflation will remain above 2.5 percent for most of 2025.” Even Trump has stopped pretending that he can beat inflation, telling Eric Cortellessa in his Time “Person of the Year” interview, “It’s hard to bring things down once they’re up.”
In the same July speech, Trump stated, “Incomes will skyrocket.” However, according to the website Trading Economics, which compiles statistics from official sources, nominal wage growth will fall from 5.6 percent in October (and a projected 5.4 percent in the fourth quarter of 2024) to 4.7 percent, 3.5 percent, and 2.5 percent in the first, second, and third quarters of 2025.
If Vanguard is correct in its prediction that inflation will not fall below 2.5 percent next year, real wages will either stop growing or begin to fall. For the past two and a half years, real median and average wages have been rising under Biden.
Of course, these are all predictions; we don’t know exactly what will happen in 2025. However, in my opinion, these respectable calculations are overly optimistic.
The experts predict that the economy will perform somewhat worse. Without the obligation to give everyone the benefit of the doubt, I believe the economy will tank. Your investments may increase in value, which is all that the oligarchs care about. But by this time next year, I doubt your boss will have promised you a raise in 2026. Instead, he might tell you to clean out your desk.
