Collins J. Okoth
The Vanguard Group head of global economic research and senior international economist Kevin Khang has cautioned markets to prepare for potential inflation spikes during President Donald Trump’s term.
Khang further mentioned that while the government is nearly winning its inflation battle, the proposed tariffs and policies could have a huge impact on the country’s economic situation.
Talking to the Wall Street Journal, the investment advisor explained that he is more guarded about possible fiscal policy changes and economic forecasts. Khang revealed that while tariffs could trigger inflation, Trump’s plan to deport immigrants could also contribute to the rise. He outlined that deportation will increase the strain on labor markets, leading to understaffing in several sectors.
Multiple economists, including Nobel prize-winning economists, have also expressed concern that Trump’s policies could trigger inflation. In a letter signed by top economist Sir Angus Deaton, the 16 economists agreed that Americans worry about Trump re-igniting inflation that is already on a sharp decline.
Former U.S. Treasury Secretary Lawrence Summers also told CNN Business on November 13 that if Trump follows through with his campaign promises, the country’s inflation shock may be greater than that it experienced in 2021.
The Wall Street Journal speculated about how serious the incoming president is about the tariff changes. The report highlighted the inflationary nature of tariffs and whether the U.S. would feel inflation as bad as it was in 1931.
Goldman Sachs projects S&P 500 gaining 10% in 2025
Stocks have reacted to Trump’s victory, soaring significantly since the November 5 elections. Goldman Sachs and Morgan Stanley recently projected that the S&P 500 will increase by 10% in 2025, possibly hitting 6,500.
The Chief Equity Strategist at Goldman Sachs, David Kostin, explained that the anticipated hike in inflation will have a great risk on the forecast. Kostin continued that immigration policies, tariffs, or fiscal policy changes could cause an inflation hike.
Goldman Sachs is still more bearish about the index in the long term, projecting only a 3% return from the S&P 500. The bank’s forecast highlighted the index’s valuations as the main worry among investors. Interactive Brokers senior economist Jose Torres revealed that the markets are vulnerable to volatility, shocks, and turbulence due to “extended valuations on equities.”
Torres hinted at U.S. companies’ expectations of increased corporate profitability from Trump’s corporate tax cuts from over 20% to 15%. However, the economist warned that previous dealings with the incoming president have shown that the process might not be smooth sailing.
Ken Griffin advises President-elect Trump against extreme policies
According to a Bloomberg report, the billionaire investor and Citadel founder Ken Griffin advised incoming president Trump against initiating extreme fiscal policy changes. More specifically, the Citadel founder expressed his concern about the promised tax cuts and tariff hikes.
Griffin, one of the biggest Republican Party donors, said that severe policy changes could hurt the country’s economy. The billionaire insisted that immigration should be open to outsiders who wish to come into the country to work. Griffin also warned against underestimating the labor immigrants contribute to the U.S.
He further outlined the need for the country to encourage the “best and brightest” to come build businesses in the country. Griffin gave an example of the CEO of his market maker, Citadel Securities, Peng Zhao.
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