President-elect Trump is prepared to hit the ground running come January 20th. Compared to his surprise victory in 2016, the soon-to-be 47th POTUS has many names in mind to fill his cabinet this time around. Some of his selections have riled up angst on the left and within traditional political circles in Washington DC. Trump is beholden to nobody except the 50% of the electorate who awarded him a second term, so the next four years will likely bring about significant change, both on Capitol Hill and on Main Street. 

Wall Street will be impacted too. Already, investors have taken a shine to Trump’s pick for Treasury Secretary. Scott Bessent, a hedge fund manager who worked alongside George Soros, is perceived as a sharp mind who can get things done. Whereas the current Secretary of the Treasury, Janet Yellen, has a long history serving in various Federal Reserve roles and sticking tight to the world of academia, Bessent puts real dollars on the line each day in his work. 

This type of transition underscores the need for investors to adapt to new environments quickly, and that’s where a dynamic portfolio strategy can provide an edge. Allio’s approach considers both market cycles and macroeconomic changes to help clients stay ahead of the curve.

It remains to be seen how the American businessman will fare teaming up with Trump, but markets rallied on the announcement in November and bond yields fell – both reactions were a vote of confidence for the 62-year-old South Carolinian.

US Breakeven Inflation Rates Rolling Over After the Bessent Pick

Source: Goldman Sachs 

But there’s more at stake. Trump 2.0 could look much different than the 2017-2021 period. Back then, the focus was initially on sweeping tax cuts, helping to propel markets to huge gains in the post-election year with historically low volatility. As 2018 approached, Trump took aim at China with an America First policy abroad. He fought for increased tariffs and to renegotiate trade agreements around the world. 

The stock market wasn’t as sanguine as was seen in 2017. As that year progressed, interest rates were on the rise, eventually hitting 3.25% on the 10-year note after dipping to barely above 2% in 2017’s third quarter. The Fed, led by Jay Powell, continued to hike interest rates in Year 2 of the Trump presidency, causing consternation from Donald toward Jay, as the policy rate rose above 2%.

Navigating these policy shifts requires a platform that goes beyond traditional investment advice. Allio integrates macroeconomic expertise with personalized strategies, ensuring clients are well-positioned regardless of geopolitical turbulence.

10-Year Treasury Yield 2017-2021: Interest Rates Rose Amid Strong Growth Early in Trump’s First Term, Then Fell Leading Up To and Through the Pandemic

Source: Stockcharts.com

Fed Funds Rate Last 10 Years: The Policy Rate Rose from 2015 to Early 2019

Source: St. Louis Federal Reserve

The Fed backed off from hiking rates further in 2019 and even began an easing cycle that culminated in swiftly reverting to a zero-interest rate policy due to the pandemic. The rest was history, as they say. COVID became the focus of the world in March 2020, and Joe Biden narrowly won the White House the following November. 

Today’s stimulus-fueled economic growth with solid consumer spending trends and lingering inflation presents challenges and opportunities for Trump. The economic outcome is not known, but we can be confident that change is on the way. Preparing now for another monumental four years is critical for investors.

Disruption Is Happening – Starting with DOGE

Trump continues to fill out his cabinet with business leaders and candidates who, if confirmed, vow to shake up business as usual within the executive branch. Elon Musk and Vivek Ramaswamy stand out, leading the newly formed unofficial Department of Government Efficiency (DOGE). DOGE, of course a play on letters with respect to the Dogecoin meme cryptocurrency, has a mission to cut the fat across real departments in the federal government. 

It remains to be seen how much fiscal spending it can slash since more than one-fifth of total US federal government spending comes from Social Security. Health-related outlays, interest payments on debt, and Medicare together account for almost 40% of Fiscal Year 2024 spending. To truly disrupt the fiscal status quo, reform would likely be required in those areas that typical politicians fear touching with a 10-foot pole. 

Elon Musk is perhaps the world’s best innovator and the father of EVs, however, and there’s the potential for the richest man on earth to uncover new ways Big Brother can meet its obligations while being fiscally responsible, unlike past administrations.

For investors, these kinds of disruptions create both risks and opportunities. Allio’s AI-driven insights help uncover trends across asset classes, ensuring portfolios remain agile and responsive to a rapidly changing landscape.

Entitlements Represent a High Share of Government Spending

Source: Apollo Global

Robert F. Kennedy, Jr. – Department of Health and Human Services

Outside of Trump tapping Matt Gaetz for Attorney General (which fell by the wayside upon his withdrawal from consideration to be within the new cabinet), the selection of Robert F. Kennedy, Jr. to lead the Department of Health and Human Services (HHS) sent waves across the Health Care sector of the stock market. Moreover, the left was flat-out stunned that a noted critic of vaccines and traditional big pharma dominance may soon lead one of the most impactful departments of government. 

RFK has been outspoken regarding his intention to take on the industrial food complex and drug companies that have “engaged in deception, misinformation, and disinformation.” The independent, turned Trump ally, vows to “Make America Great and Healthy Again.” 

The Health Care sector was already lagging the S&P 500 coming into the election season, and its negative alpha persisted as it became apparent that Trump was ahead in the race. Today, valuations for many biotech stocks are modest while mega-caps like Eli Lilly (LLY) and UnitedHealth Group (UNH) maintain a commanding presence. With RFK’s long-standing attacks on large food and drug behemoths, opportunities could arise for smaller up-and-coming consumer-first wellness firms. 

Shares of companies in the sugary and salty snack areas, in the Consumer Staples sector, have also endured selling pressure. Those stocks, such as PepsiCo (PEP), Mondelez (MDLZ), and Hershey (HSY), have performed poorly in recent months, evidence that RFK is for real and likely to be confirmed as the next Secretary of the HHS. It’s possible that some of the stock reaction could be overdone, but RFK would probably lean into new ideas and ventures that promote health and wellness, potentially laying the foundation for outperformance from smaller-cap consumer stocks.

Pepsi, Mondelez, Hershey Shares Began to Struggle when Trump’s Odds Increased

Source: Stockcharts.com

Tulsi Gabbard – Department of National Security

We’ve touched on fiscal policy, government spending crackdowns, and the impact on health and food companies. Those three areas have obvious financial market implications. What’s less clear is how Tulsi Gabbard’s selection to be the next director of national intelligence will affect certain slices of the stock market. 

The former Democrat, now “proud Republican” (as Trump describes) has scant experience in the field of national intelligence, but her clear stance in opposition to US intervention in the war in Ukraine was a major selling point for Trump. 

Rumors now swirl that Florida Governor Ron DeSantis may be considered as Defense Secretary as Pete Hegseth comes under attack. A Gabbard/DeSantis tag-team on national intelligence and defense may lead to further volatility in the aerospace and defense industry.

Shares of GE Aerospace (GE), Lockheed Martin (LMT), L3Harris Technologies (LHX), Northrop Grumman (NOC), RTX Technologies (RTX), and General Dynamics (GD) have all given back ground after soaring ever since the start of Putin’s war. While they are still winners in the bull market, Trump’s first term was marked by relative peace in the world with the 45th POTUS taking a much less aggressive policy stance regarding the US acting as the world’s chief of police. 

National defense spending is the fifth-biggest spending bucket for the federal government and areas like the Pentagon are bloated with bureaucracy, so we could see DOGE work some magic there. On the other hand, many GOP backers are foreign policy hawks, so Gabbard and whoever will fill the Defense Secretary role will have their work cut out for them to execute the President-elect's foreign policy vision.

Aerospace & Defense Stocks Performed Well Under Biden, Correcting into Year-end 2024

Source: Stockcharts.com

Kash Patel – FBI Director

Sweeping changes are potentially on the way at the FBI too. Kash Patel, a loyal Trump supporter and fellow skeptic of the Bureau, was chosen to lead the FBI. Patel will face a tough Senate confirmation battle given his clear opposition to much of the establishment intelligence community – he even detailed his strong beliefs in his 2023 book. The 44-year-old lawyer and former federal prosecutor at the Department of Justice seeks radical overhaul at the FBI, including major surveillance reform. 

If Patel is confirmed, he would play a crucial role in Trump’s plan to deport illegal immigrants. There are between 8 million and 11 million undocumented people in the country, most of whom are currently working. With the assistance of Patel at the FBI, Trump could better arrange for mass deportations. That would shrink the labor force, possibly drive up wages for working-class Americans, and lead to lower potential GDP. It might also result in a loosening of the real estate market in certain regions. 

While the employment picture and housing market could see secondary impacts, the Deep State would be in Patel’s crosshairs. If confirmed to be the next FBI Director, Patel may look to prosecute those involved with the fake Russia-Trump link pushed by a massive “criminal enterprise” while calling for the firing of many thousands of government employees who aid in the Deep State. 

Elections have consequences. “Russia Gate” was a clear attempt by the left to take down the 45th President, and Patel seeks accountability and justice for that complete waste of resources and failure to the American people. For investors, more transparency at the FBI would bring confidence in certain industries that do business with state and local authorities as well as the federal government.

Lori Chavez-DeRemer – Department of Labor

Next, let’s take a look at Lori Chavez-DeRemer, Trump’s pick to lead the Labor Department. This pro-union Republican who recently served as a Congressional representative from Oregon champions child care system reform. If she were to be confirmed, it would mark a milestone in the broader trend of the GOP backing the middle-class worker. 

Chaven-DeRemer was one of three House Republicans to support the PRO Act, a union bill that would strengthen workers’ rights to organize. One of Trump’s campaign promises was to make overtime pay and tips exempt from income tax liability, and she would seek to undo many of the Obama-era regulations on overtime rules, impacting companies that employ low-end wage earners.

Howard Lutnick – Commerce Secretary

Turning back to Trump’s nominees and selections directly related to financial markets, Cantor Fitzgerald CEO Howard Lutnick is a familiar face for investors. The executive gained notoriety for his leadership following the 9/11 attacks; his organization was most impacted, losing 658 employees in the World Trade Center. He has since hosted annual fundraisers for the surviving families. 

Lutnick, a shrewd businessman, is now tasked with leading the tariff and trade agenda. The Wall Street billionaire was a vocal advocate for Trump’s proposed agenda during the campaign. The Commerce secretary generally works to support American business as it oversees 13 bureaus, so Lutnick will partner with the president-elect's cabinet. 

For clues on his ambitions, at the Madison Square Garden rally immediately before the election, he suggested that the US was better off when it had no income tax and only tariffs funded the federal government. Thus, the imminent extension of the 2017 Tax Cuts and Jobs Act could feature added taxpayer-friendly tweaks and firm taxes on imported goods from China, Mexico, and Canada.

Paul Atkins - Chair of the US Securities and Exchange Commission (SEC)

Following the Bessent and Lutnick picks, Trump tapped Paul Atkins to be in charge of the SEC. The pro-crypto CEO of Patomak Global Partners and former SEC commissioner is another real-world businessperson who is broadly against too much regulation. His leadership at the SEC would sharply contrast Gary Gensler, the current chair, who has tied financial firms’ hands for years, with particular disdain for crypto companies and the HODLers. Gensler’s days are numbered; he announced that Inauguration Day will be his last at the SEC helm.

It’s reasonable to assert that Atkins and Trump will work hand-in-hand to build a strategy reserve of bitcoin to carry out Trump’s goal of making the US the crypto capital of the world. Atkins could also make capital markets looser, thereby fueling an IPO and M&A comeback. Wall Street dealmaking has been tepid in recent years despite the bull market. 

Atkins was regarded as the most conservative, free-market proponent during his tenure at the agency. During Trump’s first term, he served on the Strategic and Policy Forum, a group of business leaders that aimed to forge policy that supported job growth and sustained high economic growth.

Kevin Hassett - Director of the White House National Economic Council (NEC)

Lastly, another advisor from Trump 1.0 is positioned to serve the POTUS over the next four years. The director of the NEC and Treasury Secretary work together to execute the president’s economic agenda, so Hassett's first weeks in office will center on cutting taxes, increasing tariffs, and expanding US energy production. 

It’s a broad job that, unlike the SEC Chair, requires Senate confirmation. Hassett's background includes work as an economist at the American Enterprise Institute before Trump asked him to join the administration. He might also be viewed as a more mainstream economic mind as he advised Mitt Romney during the 2012 presidential campaign. Hasset has produced thought leadership and strategy regarding retirement planning, too, so don’t be surprised to hear about plans to address the country’s savings challenges and deteriorating Social Security system.

Government Disruptions’ Impact on Financial Markets

Transitions are rarely easy. Whether it's breaking up with a girlfriend or boyfriend, losing a parent, or seeking a new career path, there’s often volatility and uncertainty that comes with a new chapter in life. The same is true for what’s certain to be much different vibes and policy actions in Washington beginning in 2025. 

We’ve already noted steep moves in the Health Care and Consumer Staples sectors. The diverse Industrials sector faces risks and opportunities, too, with the potential for less aggressive war activities, tough stances on trade policy, and a priority on reshoring. Big-cap tech, though popular with American consumers, has a complicated history with Donald Trump. Though he doesn’t aim to break up the Mag 7, The Donald’s close ties with Elon Musk and his social-media prowess could lead to changes among the most well-known and profitable companies.

Government disruption will center on cutting out waste. Trump is by no means a fiscal conservative, but the reallocation of resources may help improve efficiency and benefit the American people and crowded-out business owners. We haven’t even touched on the America First policy helping domestic oil and gas producers and how lower oil prices could act as a stimulus for working-class families. 

Are markets buying what Trump is selling? Stocks are up since mid-September when Trump’s victory odds began to increase. Bitcoin and gold in rally mode assert that the fiscal situation remains a question mark. The dollar’s climb underscores US-growth dominance while interest rates are now seen higher in 2025 compared with what the Fed Funds futures market priced in as of mid-September. 

For investors, this is a time to leverage technology that tracks your entire financial picture. Allio empowers clients to see how macro trends impact their portfolios and adjust allocations in real time.

In net, financial markets will almost certainly face more volatility versus year 1 of Trump’s first term. Though the GOP’s advantage in the House is slim, the red wave set to take office and the reality that Trump has no worries about seeking re-election suggest many changes are in store between now and the 2026 midterms. 

The Time Is Right for a Global Macro Strategy

There are so many pieces to the puzzle right now. Fiscal moves, uncertainty with monetary policy, labor market shifts, and fundamental changes to how the federal government operates all have implications for investors. Stocks, bonds, commodities, and currencies are in flux as institutions position for the next four years. 

Allio’s global macro portfolios are built to weather and take advantage of opportunities that arise from economic shakeups, bold new policies, and the mixing up of politics as usual. All of these x-factors must be weighed to identify turning points in markets. We empower investors to identify and act on opportunities that arise across asset classes, geographies, and industries. We believe the next few years will be unlike previous cycles, which could be a lucrative construct for investors, but chances are also high that volatility will show itself at times. Part and parcel to a dynamic macro portfolio is swinging defensive when indicators suggest. Black-swan risk and geopolitical tensions are on the increase, so the incoming Trump administration will face hurdles.

Over the coming months and beyond, we will highlight thematic and long-term ideas so that you can have the upper hand.

The Bottom Line

Gale-force winds of change are about to strike Washington. The incoming Trump cabinet picks are disruptors, a far cry from establishment ideologues of administrations past. We expect volatility at times in the year ahead, but that also means opportunities for well-prepared investors. Taking a global macro approach is the best strategy along with adapting to new ideas and trends. 

Allio’s dynamic, forward-thinking portfolios are designed to navigate complex themes, protect and grow your wealth, and uncover opportunities across markets. At the end of the day, macro matters most! If you want to stay ahead of the curve, it's time to take a macro approach to following policy and market shifts. Position yourself for success by signing up for the Allio Capital beta today and make sure you're always on top of the trends that matter most.