It’s been an action-packed start to 2025, with President Trump beginning his second term. He has wasted no time tackling the agenda he ran on and his policy goals.
Immigration Overhaul and the Labor Market Shift
Illegal immigration was perhaps the most pivotal issue President Trump campaigned and is likely what won him the popular vote. On this front, President Trump’s efforts have been an overwhelming success. Compared to the prior administrations, illegal border crossings were regularly over 100,000 every single month. At one point, monthly border apprehensions soared to 250,000. But since President Trump’s return to office, they’ve come to a near standstill.
The economic impact of securing the border is most clearly seen in the labor market. The number of foreign-born workers has tumbled by roughly 1 million since the start of President Trump’s second term. Simultaneously, native-born employment surged by 1.5 million and ended June at 132.652 million, finally exceeding the pre-COVID record high.
Tackling Government Waste: Enter DOGE
Fixing the border crisis so quickly proves that the problem was never due to a lack of funding as some politicians argued during the previous administration. This in turn provides another example of reckless spending by lawmakers. This resulted in the nation’s ballooning debt that now costs over $1 trillion just to service the interest on. Fortunately, some progress was made on this front via President Trump’s new Department of Government Efficiency (DOGE).
The various cuts under DOGE have only amounted to a drop in the bucket compared to the country’s total debt. The myriad of waste, fraud, and abuse already uncovered should hopefully illuminate the serious financial problems. Lawmakers on both sides of the political aisle have created this issue after decades of reckless spending.
Trade Policy and the Tariff Tightrope
International trade has remained a central focus of President Trump’s policy agenda. This was true both during his first term in office and again this second term. The main goal of the President is to create more trade parity between the U.S. and other nations. For years, America has had the least-restrictive trade policies in the developed world. Other countries have kept it significantly more costly for U.S. companies to do business overseas.
Tariffs are the main tool through which President Trump seeks to bring about more trade parity. Critics have argued that this approach would result in severe inflation for consumers. However, that didn’t happen following the tariffs implemented during President Trump’s first term and it has yet to manifest in 2025.
Inflation Trends and Inventory Strategies
In fact, measures of both consumer and wholesale inflation have continued to trend lower this year. This is in part due to the fact that broad economic growth had already started slowing in 2024. Also, many companies built their inventories ahead of the announced tariffs. The latter helps keep prices stable during the early stages of increased tariffs. This may be all that is needed if the higher levies are in place for only a short while.
Indeed, President Trump’s sharp tariff increases do appear to already be bringing many countries to the negotiating table. An ideal outcome could see both the U.S. and its trade partners removing all levies. This would effectively transform the world into a unified free trade zone.
The Return of U.S. Manufacturing
In the meantime, the only clear effects of recent trade policy changes have been increased revenue for the government via tariffs on imported goods, and a resurgence in the “reshoring” trend. 9 out of 10 U.S. companies recently surveyed said they expect to bring some or all of their production or sourcing back home to U.S. soil. The only undisputed negative of recent trade policy has been the way new tariffs have been announced.
They are often shared at random intervals via social media, with widely varying levels and unpredictable deadlines. Both small- and large business executives hate such uncertainty since it makes planning for the future more difficult. The stock market, with its rapid discounting mechanism, has been by far the most sensitive to the unpredictable nature of recent trade policy news.
Rebound After the “Liberation Day” Selloff
Indeed, volatility spiked, and stock prices crashed following the April 2nd “Liberation Day” announcement of tariffs for our trading partners. The depth and speed of the selloff likely created quite a scary environment for many inexperienced investors. It proved to be yet another example of why it is important to refrain from panicking during a drawdown. This wound up being one of the shortest market corrections in history.
In fact, it took only a single month for the S&P 500 to erase all of the Liberation Day losses, and the benchmark index managed to close at a new record high on the eve of Independence Day, as if to celebrate its own independence from all the bad news thrown at it in recent months. Several factors fueled the rapid rebound in equities in Q2. This includes ceasefires in the Middle East conflicts, lower oil prices, deregulation benefiting financials, increased M&A activity, and the resurgence of AI-related stocks.
Looking Ahead: Market Volatility and 401(k) Wisdom
Despite experiencing a turbulent six months, markets are unlikely to find potential volatility catalysts in the second half of 2025. It is important for investors to remember the lesson of the Liberation Day crash and subsequent rebound. This is especially true for 401(k) investors whose accounts benefit from a combination of consistent contributions and a very long investment time horizon.
Of course, each investor’s unique personal situation, risk tolerance, and other factors may warrant a bit more nuance and customization for how to handle their investments during periods of market tumult. As always, that is exactly what Slavic401k is here to help with.
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