Bank of America Economist Bhave: The Two Biggest Issues from a Market Perspective, Will Be Fiscal Policy and Trade Policy

GARRETT: “Is there any larger X factor in 2025 than the scale and scope of promised mass deportations of the Trump Administration?”
BHAVE: “From a market perspective, I think the two biggest issues will actually be fiscal policy and trade policy. And there’s a lot of uncertainty around those, as well, just as there is around immigration policy. So, with fiscal policy, you had this conversation in your last segment, right, the majority for Republicans in the House is very, very narrow. So, if they want to extend the Tax Cuts and Jobs Act, they want to do more fiscal stimulus, which we think will probably eventually get done, they have a very slim margin to work with. And then with trade policy, we really need to understand, you know, how much of the tariffs that President-Elect Trump has threatened are actually going to be implemented versus how much is a negotiating tool, right, so how much is transactional.”
GARRETT: “And for mass deportations, how much do you fear that could affect the labor market and our country, that is to say put upward pressure on prices because if there is mass deportations and workplace inspections, lots of workers in agriculture, construction, meat processing and other vital industries could be pulled out of those sectors.
BHAVE: “So, I think it’s — our base case is that there will be a slowdown in the flow of immigrants, right? It’s harder to know what will actually happen around deportations. From an economic perspective, a worker is also a consumer, so there are some downside risks to economic activity if there’s a large change in the population, right? That’s just math. In terms of pressures in specific sectors, it’s really going to depend on how things play out. Yes, there could be labor shortages in certain sectors, but it’s very hard to know at this stage.”