An Investor’s Guide to the Next Trump Administration

To state the obvious upfront: There is more than the usual level of uncertainty about what Donald Trump will do in his term as US president and even what existing authority he has to execute many of his plans, such as imposing tariffs.

Nonetheless, when it comes to policy that affects investors rather than investments, the direction of travel is fairly clear.

1) Tax Changes Are Coming

As Morningstar researchers have observed before, the last election was not fought over tax policy, but now that the election is over, it’s a safe bet that you will hear a lot about tax ideas that could dramatically change the attractiveness of some US investment strategies over the next two years.

In particular, as a somewhat cynical ploy to raise revenue in the short term, we think “Rothification” will at least be seriously considered, which will certainly change how investors think about saving for retirement.

On the flip side, more corporate business tax cuts could help stock valuations.

2) A Light Touch on Crypto

A theme of the upcoming Trump administration for investors may well end up being “buyer beware.” We expect a much lighter touch from regulators, particularly around cryptocurrencies.

Regardless of whether you believe in crypto or not, it will be important to do your diligence to check that you are buying through a reliable exchange and at a reasonable fee. And the high number of scams and outright fraud around crypto will likely continue to be a problem for investors.

It is also possible that Congress will legislate some sort of regulatory framework for cryptocurrencies, but in a closely divided Congress that has other priorities, it’s not the most likely outcome.

3) Fiduciary Protections for Retirement Investors Will Weaken

A recent Joe Biden-era rulemaking (which in turn looked somewhat like a Barack Obama-era rulemaking) extending additional protections to investors in retirement accounts such as 401(k)s and IRAs will likely be reversed before it ever goes into applicability. If that sounds similar to what happened during the last Trump administration, it is.

If you think an advisor is a fiduciary—obligated to put your interests ahead of their own—but you aren’t sure, then ask. You may also want to consult brokercheck.org to verify that a nonfiduciary professional broker has a clean record.

4) Anti-ESG Regulations May Have Little Practical Effect

The incoming administration is certainly hostile to environmental, social, and governance-focused investing. But as a practical matter, investors who want to incorporate ESG analysis into their investment strategy—either because they believe it will help them outperform investors who eschew this analysis or because they want to align their investments with their values—should have no problem doing so. The only exception? Workplace retirement accounts like 401(k) plans are likely to largely avoid ESG.

The reason is that regulations governing ESG in these plans will likely become much more challenging for plan sponsors, and that will discourage them from making ESG options available to their employees.

5) Regulators Will Look to Speed Up the Convergence of Public and Private Markets

Private markets—historically accessible only to accredited investors and institutional investors—have grown over time, as have the avenues for ordinary retail investors to access them. To a large extent, this change is industry- and investor-led rather than being led by regulators or regulations.

But we would expect regulators at the SEC and the Department of Labor (which regulates private workplace retirement plans) to make it easier for retail investors to invest in private markets. Whether investors will embrace these opportunities as the industry hopes they will is another question entirely.

Further Resources on the New Trump Administration