Last week’s presidential election sent the stock markets into a frenzy. But Donald Trump’s return to the White House has some worrying about how his policies will affect consumer prices, the agricultural, and high-tech sectors.
To make sense of the market jump and get his predictions for the future, WAMC's Lucas Willard spoke with Hugh Johnson, chairman and chief investment officer at Hugh Johnson Advisors in Albany:
First of all, I think it's been pretty remarkable that we've had a decline in inflation. And we saw some inflation numbers today, and seeing them on a sort of a continuous basis, and that inflation is on a year over year basis, is coming down. It was 2.6% for the month of October, which is getting very close to the 2% target the Federal Reserve has set as its target. So, it's number one is that inflation is coming down, and the remarkable thing is, they've been able to engineer a decline in inflation without, at the same time causing or creating a recession. That's been a big surprise, and that's been very different from what we ordinarily see in sort of financial market history. So, I'd say, from the inflation side of things, things are really good, the economic side of things, I think there's evidence that the economy is slowing, and that we'll see that show up in the numbers for the fourth quarter, and I think for the first two quarters of 2025 so you've got an economy which is slowing. You've got declines in of inflation, and in response to that, the Federal Reserve probably reduced short term interest rates once in December and probably once in the first quarter. So, if you're looking for a good, good, good prospects or outcome for the U.S. economy, when we measure it by real gross domestic product, or the output of the economy, or you're looking for good inflation numbers, you got them both right now. And I think it's pretty promising. And I would add very importantly, obviously, is New York State is solidly in the mix, and Albany is solidly in the mix in New York state. So, we've got real good numbers now, and you cross your fingers and hope that they'll continue, and I see no reason they won't.
Now, Hugh, what do you make of the market bump after election day last week?
So that's a big surprise. 1,000 points in one day in the Dow Jones Industrial Average was a pretty big bump. And I think what that really said is investors were very encouraged by the outcome. Certainly not all voters were, but certainly some investors were encouraged by the outcome. And I think that that they read into it is that, look, it probably means that there'll be clear sailing on the new president, President Trump getting his tax reductions, the extension of the 2017 tax reductions through when they sunset at the end of 2025 in other words, it probably means taxes will be just fine, won't go up, and that's pretty important. I think it will also mean to a lot of investors, they sent the message that they think it's going to be encouraging from the point of view regulation, that the Trump administration is pretty, pretty strong on regulation, and wants to see less regulation, certainly not more. And there are a lot of other aspects of the trump the Trump plan, shall we say, certainly, immigration is right at the top of the list, which might not turn out to be very good or very encouraging, and might give the economy, which depends to a great extent on the total level of employment, but employment very much depends on the level of immigration. I think that some people are a little bit set back and a little bit discouraged by the prospects on the Ian, on the immigration side of things, but generally speaking, I think everybody's pretty encouraged, and I think that they're also on board when it comes to when it comes to the tariffs that are going to be imposed, and you're going to see those imposed probably pretty early in the Trump administration after he gets sworn in office on January 20th. I think it really, quite frankly, the markets move up was a simply a reflection of an applause by investors, on balance, for what they see coming from the Trump administration. We'll just see.
Now, what about how government spending affects the regional economy in New York, here in the Albany area, obviously the seat of state government, but also, you know, right up the road from the state capitol is the Nanotechnology Center and all of the semiconductor industry around here that is relying on the chips and science act. It looks a little uncertain right now as to how President Trump and and Republicans will respond, I'm thinking differently than how President Biden supported the high-tech sector, do you think that that may create some economic uncertainty in this area?
I think it will clearly create some uncertainty, because there's no question things have been very positive for the Capital Region, and obviously, with prospects coming for nanotech, what's going to happen there? It's extremely positive. The CHIPS Act, as you recognize, has really been a big positive, generally speaking, for the U.S. economy, but also for the Albany economy. So, I think it's a big positive, and you're absolutely right. It creates a little bit uncertainty that we don't know what the direction is going to be with regard to the federal government and, for that matter, the state, but the federal government's help or assistance for the technology sector of the US economy. It's going to be extremely important, technology is going to be very important for the U.S. economy, obviously, because productivity, or the productivity that comes from spending on technology, is absolutely vital for economic growth in the US economy. But also, it's important for, obviously, the jobs, the businesses that are going to be created in the capital region. So, there's uncertainty, there's fingers crossed and uncertainty, and we're all waiting to see what the outcome is going to be. Right now, I think it's reasonably positive to expect will be continuing to make progress there, but believe me, there's uncertainty.
Elon Musk was on the campaign trail with President Trump, and Musk has said that there may be some initial hardship that comes along with President Trump's economic plans. Do you take any stock of that?
Yeah, I do, and the reason I do is I think that he sort of wedded himself to the concept of increasing the efficiency of the government. Now, quite frankly, we've seen almost every president that takes over in Washington has promised to increase efficiency at the federal government level, and by doing that, to hopefully get the deficits, the annual deficits, more in line with reality. So, Musk is part of that team that's going to be, not so much a part of the cabinet, as part of a group of people that are going to try to increase the efficiency of the of the government, thereby reduce the cost of government. Again, we've seen this before. I personally am a little bit skeptical as to much part how much progress will be made. I'm hopeful, like everybody else is hopeful, and we'll just see. This is the, I don't want to call it uncertainty, but there's no question that he's going to be focused on increasing the efficiency of the federal government and therefore reducing costs. And in some ways, it's a little bit worrisome, because some of the people that are in the federal government in Washington that are a part of this efficiency issue might lose their jobs. And I think that's another thing that you just don't want to see happen, because this economy depends so heavily on jobs in general. And I'm not sure the prospects for jobs in the Trump administration is particularly bright, particularly given his policies on immigration.
Now, what do you think that with regards to immigration and the agricultural sector, you had mentioned it a little earlier too, but do you think that in the rural parts of New York, the more agricultural parts of New York, that they will see an economic hit if President Trump's promises with regards to immigration are enacted?
Well, immigration can mean a lot of different things, and deportation certainly would be part of it, and that has been promised. I'm very worried about that. I'm very worried about that, and the impact on the whole economy, particularly the agricultural component of the U.S. economy, so that's a reason to be very worried. But we're not just about talking about deportation. We're talking about limiting the levels of immigration, maybe even to the point of stopping immigration at the southern border. And this also is a very important issue. Immigration has been, as I mentioned, very important to the growth of the labor force, the growth of employment in the U.S., and as such, therefore it's very important to economic growth, real gross domestic product growth in the U.S. And there's a lot of legitimate worries about the employment, let's call it the employment policies of the Trump administration, particularly when you look at trying to increase efficiency that might be at the expense of some people that are employed in government, increasing efficiencies that might be at the expense of some of the people employed in agriculture, and, of course, the immigration policies, which will clearly be at the expense of those that are working in agriculture and a lot of other industries. And so, you've got to be a little bit worried about employment, generally speaking, under a Trump administration, and the impact that has on the economy. It's a worry. It's a concern. Anytime you get a change of this magnitude, you're going to have things to worry about, and that's certainly one of them.
Now, Hugh, what about crypto currency? President Trump has said he wants to make the country, the U.S., the center of the cryptocurrency world, and also, at the same time, Bitcoin hit an all-time high recently, what do you think about the future of cryptocurrency? Is that factoring into your predictions at all?
Well, it's factoring into my predictions in the sense that I worry I think about. Crypto, I think about the move we've seen higher in Bitcoin and crypto, I really do see that. And I look at that as somewhat as an example, and probably a pretty good example of what can happen when investors, when investors move from, say, investing, into speculation. You know, you can make a very good case. I presume that the case for crypto going higher is pretty strong case. After all, there's some limits on supply, and there seems to be a growing demand, a demand which is now being encouraged by the President. And that demand shows up, of course, in the rise in the price. But again, I think it's important to recognize that there is a, let's call it a, to be nice, a speculative component to this, and therefore it carries with its significant risks, I don't, quite frankly, think that it's going to go nearly as far and as fast as many think. And there are plenty of folks that are big crypto fans, Bitcoin fans, that really, they see a bright future for it. I'm not in that camp. I see it as to being somewhat speculative and a little bit worrisome for the episodes call it the pocketbooks of those that get caught up in it and therefore invest in it. I would just simply, from my own personal point of view, recommend strongly, I might add that investors don't have a very high percentage of their personal assets at all, at all tied up in in Bitcoin or in crypto currency. I don't think it's nearly as promising as everybody thinks.
