The election we thought would never end just did, and now we have a new president-elect: Donald J. Trump. While some are celebrating and others are reeling, one question unifying Americans is perhaps this: What does the election mean for my wallet?
While there's no way of predicting the future of anyone's personal finances, a number of experts think they have a pretty good handle on how the future President Trump may affect our bank accounts. Here's how your financial portfolio could be affected by the new president.
You may have more job security -- or not at all. Of all of the ways your personal finances may change, this one is the hardest to predict. Every industry is different, and you may be in one with a shaky or promising future -- the case no matter who was elected president.
That said ...
"Expect lots of uncertainty in the coming months," says Aaron Jackson, professor of economics at Bentley University in Waltham, Massachusetts. "This is likely to translate into sluggish growth, and with some experts already worried the expansion has run its course, a presidential pick with what many see as vague or conflicting policies could create a significant amount of uncertainty to tip the economy back into recession."
Note his word could. Still, Jackson isn't optimistic. "If a Trump president is able to implement the tax changes he proposes, it may be able to offset some of the headwinds from this uncertainty, but I doubt it," he says.
And as Steven Gattuso, an associate professor at Canisius College in Buffalo, New York, and a portfolio manager and financial planner for Courier Capital LLC helpfully notes, "Many believe Trump's policies would potentially start a trade war."
Historically, trade wars often lead to job losses, especially among lower-skilled and lower-paid workers.
Gattuso also agrees that under Trump, "the U.S. might see a recession earlier."
Your taxes will likely go down, especially if you're wealthy. The nonpartisan Tax Policy Center has stated that 51 percent of the savings from Trump's tax plan would go to the richest 1 percent of American households. Much of this is because wealthy households would pay a maximum marginal rate of 33 percent instead of 39.6 percent, as they do now.
There will be other changes, of course, among them that Trump will increase the standard deduction to $25,000 for single filers and $50,000 for those married filing jointly, says Richard Lavina, a Miami-based certified public accountant and founder of Taxfyle, an on-demand tax and accounting marketplace.
Current standard deductions range from $6,300 to $12,600 depending on filing status, Lavina adds.
"This increase in the standard deduction would reduce taxable income for most taxpayers as the majority of individuals will not have itemized deductions in excess of these balances," he says. "A downside of this is that the standard deduction will reduce the tax benefit of charitable deductions, which is an itemized deduction."
Interest rates will likely stay low for a little while. The Federal Reserve will decide at its final meeting of the year, on Dec. 13 and 14, whether interest rates will rise before year's end. Jackson says it's possible the Fed will hold off on raising rates, perhaps for some time, if Trump's election creates enough uncertainty in the economy.
That would mean, for instance, that the interest on your credit card debt wouldn't climb any time soon.
But it's probably best not to assume that rates will stay low for too long, according to Daniel Kern, chief financial strategist at TFC Financial Management Inc. in Boston.
"His spending plans are significantly more ambitious than Clinton's, and his track record in business shows his appetite for debt-financed spending," Kern says. "Rates under Trump may not go up immediately, but his approach would be likely to fuel a resurgence in inflation, which ultimately would lead to higher borrowing rates."
And, inflation, of course, would mean that what your paycheck buys won't stretch as far.
Access to credit may improve. Christopher Thornberg, director of the University of California--Riverside Center for Economic Forecasting at the School of Business Administration, feels this may happen, which might yield good opportunities for consumers. Better access to credit could lead to it being easier to get funding to start a business or buy a house.
On the other hand ...
"Donald Trump favors deregulation," Thornberg says. "This suggests potentially better access to credit for many Americans but also a return to the Wild West aspects of the industry that blew up so spectacularly throughout 2007 to 2010. Better in the short term, but bad negative outcomes in the medium term."
So if you're sensing a theme here, there is one -- uncertainty. For better or worse, many financial and economic experts, not to mention American consumers, simply aren't sure what to expect from a Trump presidency. But if you're stressed about your finances, here's the good news, sort of. The president, no matter who it is, only indirectly affects your personal finances, says Gattuso, citing a feeling among many economists.
The Federal Reserve, Gattuso adds, is much more likely to have a great impact since so much of what it does affects loans, credit card rates and the stock market.
Of course, presidents appoint the chair of the Federal Reserve. Furthermore, Gattuso says that a president's policies can impact some of the actions the Federal Reserve takes. So there is a ripple effect, which may be good or bad. Which brings us back to where we started: half of you reading this probably want to splurge on a victory party, and the other half is looking at what it would cost to move to another country.
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