Personal Finance

What a President Trump Might Mean for Your Personal Finances

The candidate's policies aren't all fully formed, but here's a quick sense of how your personal balance sheet might hold up.
Photographer: Andrew Harrer/Bloomberg

On Sunday the U.S. presidential candidates square off in the second of three debates. It's an especially important moment for the Republican contender, Donald Trump, who has been struggling since Hillary Clinton got the better of him in the first debate, according to prominent polls. 

Here's a quick look at how some of Trump’s economic ideas could broadly affect your finances should he prevail with both voters and Congress—keeping in mind that his plans are likely to evolve.

Your purchasing power

The hefty tariffs on imports Trump has proposed include many goods we take for granted and don’t have the capacity to produce within our own borders, said Mark Hamrick, Washington bureau chief and senior economic analyst at Bankrate.com. "Certainly agricultural sources in Mexico, they either become more expensive or unavailable," Hamrick said. "Good luck eating dandelion greens for four months of the year."

The threat of a 35 percent tax on auto imports from Mexico troubles Sam Stovall, U.S. equity strategist for S&P Global Market Intelligence. "That's certainly going to hurt, because basically everything is imported, either in U.S. or foreign-made cars," he said. And tariffs often spark retaliation, affecting U.S. exports as well.

On the other hand, if the tough talk succeeds in wresting concessions from partners, it could improve our trading position, Stovall said.

Your job

If Trump's tariffs were enacted, including a 45 percent levy on Chinese goods, it would badly damage the economy and cost a lot of jobs, said Mark Zandi, chief economist at Moody’s Analytics. And if his tough immigration stance were put in place, Zandi warned, “it would be, to steal a phrase from him, a disaster.”

“If Trump could deport even a fraction of the 11 million immigrants, it would be very disruptive to business,” he said, creating a hole in an important sector of the labor force and removing a lot of consumers from the economy. “If he deported all 11 million, it could lead to a recession. It would be a mess.” 

Your investments

Repatriating foreign earnings and enacting some corporate tax reform, as Trump has discussed, could bolster stocks and benefit investors. Companies have twice as much cash on their books as they did 10 years ago, Stovall noted, and a lot of it is overseas. If they get more favorable tax treatment in the U.S. and bring that money back, they "will have additional money with which to do dividends, do share buybacks, and it could help companies looking to build new plants and equipment." That, he said, could bring "better performance of the shares of the companies that we're invested in in our 401(k)s."

But a repeal of the Affordable Care Act "would do nothing but throw the health-care industry into a tailspin," Stovall said.

A recent change in the candidate's views on the minimum wage would affect such industries as retail and restaurants. Trump said earlier in the race that he would not raise the wage. Now, while he's stressed that he thinks states should take the lead, he's said he would support a $10-an-hour minimum wage. 

There really is something to the maxim that Wall Street dislikes uncertainty, said Hamrick. It weighs on financial markets and the performance of the economy. "That Trump is unpredictable is quite distasteful for many people trying to price in risk and opportunity," he said. "Certain businesses are going to be cautious about making investments until they have a bit more clarity, and that includes clarity on how the leadership of the Congress is determined. There's a lot of cash sloshing around in the system, but it's not being put to work."

If a business is booming, the uncertainly is less of a factor, he said. "If you're a business on the margin, however, and wondering if you should take a risk, you might be more risk-averse."

Your taxes 

Overall, Trump's tax plan seems to yield more benefits for higher-earning Americans. His move to go to three income-tax brackets rather than seven—12 percent on income up to $75,000, 25 percent for $75,000 to $225,000, and 33 percent on income over that—means top earners would no longer face a 39.6 percent tax bracket. The standard deduction for single filers would be $15,000, and $30,000 for joint filers. Itemized deductions would be capped at $100,000 for single filers and $200,000 for married couples filing jointly. Trump would kill the estate tax—which would definitely benefit the wealthy—and keep the popular mortgage interest deduction

Your plan

The smartest move you could make right now, amid the election year's sound and fury, is simply to focus on building your financial future, said Kate Warne, investment strategist at Edward Jones. With so much uncertainty on both the domestic and foreign fronts, that means owning both bonds and stocks, especially international stocks while the dollar is strong, and diversifying both across and within asset classes. 

And no matter what the candidates say, remember that the U.S. is running a budget deficit, so you need to prepare for the possibility of higher taxes, Warne said. Investing in tax-free municipal bonds and taking advantage of any tax-deferred accounts, such as IRAs and 401(k)s, is a great way to start. 

In short, she advises, pay less attention to the political discourse and more to what you need to do now. Certainly don't sit on the sidelines, she said.

"Stocks don't wait," Warne said. "So you shouldn't wait either."

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