In the politically charged atmosphere following the election, the proposals of prominent figures like Donald Trump and Elon Musk are under scrutiny. Investors are assessing the feasibility and potential impact of these high-stakes plans on the economy.
Despite bold promises of deportation measures and spending cuts, Wall Street maintains scepticism about their real-world implications. Surveys reveal doubts about the ability to deliver on these initiatives without significant economic disruption.
Investor Sentiments on Immigration Policies
Most investors polled by Goldman Sachs do not expect the deep spending cuts that Elon Musk has promised to make in the federal budget. President-elect Donald Trump has promised to expel millions of undocumented people as part of the biggest deportation programme in American history. However, Wall Street does not believe the looming immigration crackdown will live up to Trump’s campaign trail hype.
Although investors expect immigration will slow significantly during Trump’s second administration, just 6% of investors expect net immigration (the difference between the number of people entering and those leaving a region) will turn negative under Trump, according to a Goldman Sachs survey released Sunday. In other words, Wall Street is betting that, even with Trump’s promised crackdown, more people will enter the United States than are deported from it. That would come as a relief to the business owners who warn that wide-scale deportations of millions of people, as Trump has repeatedly promised to enact, will starve them of workers and lift prices on consumers.
The findings underscore the reality that deportations will likely be slowed by legal obstacles and logistical constraints, not to mention the economic risk of causing worker shortages at farms, construction sites and elsewhere. Nearly half of the investors anticipate annual immigration will average between 500,000 and 1 million under Trump, according to Goldman Sachs. That would be down from the recent annualized rate of about 1.75 million and the peak of 3 million last year.
Expectations for Government Spending Reductions
There is significant scepticism among investors about Elon Musk’s promise to severely slash government spending. Trump tapped the tech billionaire to help lead the new Department of Government Efficiency, or DOGE, a non-governmental entity charged with dismantling bureaucracy and cutting wasteful spending.
Just about 10% of investors expect the Musk-led commission will be able to reduce government spending by more than $400 billion a year, Goldman Sachs found. Nearly 10% expect DOGE will cut spending by $200 billion to $400 billion. Yet even those figures would pale in comparison with Musk’s lofty goals.
In October, Musk was asked by Trump transition team co-chair Howard Lutnick at a rally how much he could cut out of the federal government’s $6.5 trillion budget. “Well, I think we could do at least $2 trillion,” Musk replied at the campaign rally, held at Madison Square Garden in New York City. “Your money is being wasted, and the Department of Government Efficiency is going to fix that.”
Economic Constraints and Challenges
Yet a plurality of investors – 42% – expect insignificant or very modest spending cuts, according to Goldman Sachs. Experts have said it will be very challenging to get to Musk’s spending cut goal without touching entitlement programmes like Social Security, cutting defence spending or eating into interest payments.
Former Treasury Secretary Larry Summers said last month that Musk would be lucky to even find $200 billion in budget cuts because the scope for curbing waste is limited. “It’s just mathematically impossible to find $2 trillion,” Glenn Hubbard, a former economic adviser to George W. Bush and former dean of Columbia University’s Business School, said during the same Economic Club of New York event.
Of course, it’s almost never been smart to bet against Musk, the world’s richest person. And some business leaders are excited by his ambitious goals. “Elon Musk, the Edison of our era, could revolutionize government through DOGE,” Salesforce CEO Marc Benioff said in a recent X post. “Imagine $2T in savings, a leaner, smarter system & a future-ready nation.”
Investor Concerns with Tariff Policies
Investors are also imagining higher tariffs, and the potential side effects from Trump’s promised trade agenda. Tariffs have emerged as the No. 1 fear among investors, according to the Goldman Sachs survey. Asked what 2025 policy concerns them the most, 60% picked the impact of larger tariffs on inflation, economic growth and stocks.
The next-closest risk, at 20%, was the risk that tax and spending measures will provoke fiscal sustainability concerns and the inflation consequences of deportations.
Even if investors are wary of tariffs, they are not exactly panicking. On the first day of trading after Trump’s new threats of massive tariffs on China, Russia and other BRICS nations, both the S&P 500 and Nasdaq were on track to finish at record highs on Monday.
Business Community Reactions
Business leaders express mixed feelings about these potential changes. Many are worried about workforce shortages, especially in sectors heavily reliant on immigrant labour, such as agriculture and construction.
The business community is watching the developments closely, wary of the ramifications on their operations. There is a growing sense of uncertainty about how these policies will play out in the real economy.
The prevailing sentiment is cautious optimism. While there are significant concerns, some see opportunities for streamlining operations and mitigating risks through strategic planning and adaptive measures.
Impact on Financial Markets
The uncertainty surrounding these policies is having a noticeable impact on financial markets. Investors are adjusting their strategies to account for potential volatility and unpredictability.
Stocks in industries that depend on exports and international trade are experiencing fluctuations based on shifting tariff policies and immigration measures.
Market analysts suggest that a comprehensive assessment of these policies and their potential outcomes is essential for making informed investment decisions.
Legal and Logistical Barriers
The legal challenges facing Trump’s immigration plans are substantial. Courts may block or delay these actions, affecting their implementation. Legal experts suggest that executive actions may not have the lasting impact that legislation brings.
Logistical constraints also pose significant hurdles. The scale of the proposed deportations would require massive resources and coordination, which may not be feasible under current conditions.
These factors introduce layers of complexity that investors need to navigate carefully as they assess the potential risks and benefits of the current political landscape.
Possible Long-term Effects
The long-term impacts of these policies remain uncertain. There could be fundamental changes to the economic landscape if widespread deportations and spending cuts occur.
Experts warn that economic growth could be stifled by labour shortages and higher consumer prices. It is vital for businesses and investors alike to consider these possibilities.
Staying informed and flexible will be key strategies in adapting to these potential changes.
Investor Strategies Moving Forward
Investors are likely to adopt more conservative strategies. Diversifying portfolios and maintaining liquidity could be prudent moves to safeguard against unforeseen shifts in the market.
There is a focus on sectors that may benefit from these policy changes, such as domestic manufacturing and technology.
Analysts recommend continuous monitoring of policy developments and market reactions to stay ahead of potential economic disruptions.
Summary of Key Points
In summary, Wall Street remains skeptical about the potential for deep spending cuts and massive deportations promised by the incoming administration. Investors are wary of the challenges and contradictions inherent in these ambitious goals.
While some sectors may find ways to adapt, the overall sentiment is one of caution amidst the many uncertainties these policies introduce.
As events unfold, both individuals and businesses will need to carefully balance optimism with pragmatism in their approach to the evolving economic landscape.
The landscape of U.S. government policy is poised for significant shifts, yet much remains uncertain. Investors are keeping a close eye, balancing potential risks with opportunities.