Regulation
Roll back regulation
Threaten Fed independence
Attempt to remove SEC/other agency heads
Roll back regulation
Threaten Fed independence
Attempt to remove SEC/other agency heads
Pro-ESG/IRA policies to continue
Further support for pro-ESG/IRA policies
Growth and Inflation
Tariffs and immigration raise inflation profile
by 0.9-1.3pp in 2025
Negative GDP growth impact of 1.0-2.0pp by 2026
Tariffs and immigration raise inflation profile
by 0.8-1.0pp in 2025
Negative GDP growth impact of 0.8-1.2pp by 2026
No material impact on inflation/growth
No material impact on inflation/growth
Tax & Fiscal
Extend 2017 tax cuts, SALT deduction at risk
Lower corporate taxes from 21% to 20%
Increase defense spending
Low risk of debt ceiling standoff
2017 tax cuts renewed, but with some increased taxes offsetting deficit increase
Corporate tax rate unchanged at 21%
High risk of debt ceiling standoff
2017 tax cuts renewed, but taxes raised for top earners
Increase corporate taxes from 21% to 25%
Highest risk of debt ceiling standoff
Renew 2017 tax cuts, but raise taxes for top earners
Raise corporate taxes rate from 21% to 28%
More social spending
Low risk of debt ceiling standoff
Tariffs and Immigration
10% tariff on all imports
60% tariffs on China (likely lower after negotiation)
Deport 1-7mn undocumented immigrants
10% tariff on all imports
60% tariffs on China (likely lower after negotiation)
Deport 1-2mn undocumented immigrants
Current tariffs maintained
Tighter border policy, but no deportations
Current tariffs maintained
Tighter border policy, but no deportations
Fed Reaction
Pause rate cuts and monitor
inflation/growth shock
Harder landing brings additional cuts, with rates reaching 2% by 2026
Pause rate cuts and monitor
inflation/growth shock
After H1 2025 reassessment, resume gradual cuts
Gradual easing to 3% neutral rate
Gradual easing to 3% neutral rate
Rates Implications
Initial bear steepening likely to turn into bear flattening amid Fed on hold
TIPS BEs widen on rising inflation expectations
Initial bear steepening likely to turn into bear flattening amid Fed on hold
TIPS BEs widen on rising inflation expectations
Gradual bull steepening as market focuses
on inflation/growth
Debt ceiling standoff could accelerate
bull steepening
Bull steepening as market focuses on inflation/growth
Lower debt ceiling standoff risks
Equity Implications
Risk asset positive amid expectations
of deregulation
Tariff/deportations remain source of uncertainty
Risk asset positive amid expectations of deregulation
Tariff/deportations remain source of uncertainty
Risk asset positive amid expectations of policy gridlock
Higher regulation to weigh on sentiment
Risk negative amid expectations of more regulation and business unfriendly policies
FX Implications
Very USD bullish as equities and macro favor USD
Tariffs favor U.S. growth over Europe, China
USD positive as Trump still has power over tariffs
and trade policy
U.S. equities still outperform ROW, supporting USD
USD negative, reflecting status quo
Frictions with China, but no trade war
USD negative, favoring ROW over US equities
U.S. current account becomes an issue
Republican Congress
Trump White House
Split Congress
Split Congress
Democrat White House
Democrat Congress
Source: TD Securities