Does Trump Have A Rough Road Ahead?

After President Trump won his second term, the Monday morning quarterbacking began as to why. And increasingly the economy appears to have been a key reason Trump won.

Many voters thought the economy under Biden was horrible. And as a result, they turned out in high numbers to turn Biden out of office.

But now many of those voters think that things will be better under Trump.

While that may be true, if they think that Trump will save the economy as soon as he takes office, they might be in for a rude awakening.

Here are three things working against President Trump that could mean that he may not be the immediate savior the economy needs.

1. Monetary Policy

Keeping interest rates too low for too long in the early 2000s resulted in the collapse of the housing bubble and the resulting 2008 financial crisis. But rather than learning its lesson, the Federal Reserve doubled down, keeping interest rates at historically low levels for over a decade, and only beginning a serious rate hike cycle again in 2022.

Now that the Fed has begun to cut rates again, just like in 2007, the parallels between then and now seem eerily similar. Could we be headed toward recession again due to the Fed’s monetary policy?

If you understand Austrian Business Cycle Theory, you’ll understand how government intervention in financial markets causes the boom and bust of the business cycle. And the Fed continues to engage in manipulation of interest rates, in its attempt to fulfill its dual mandate.

President Trump will have to contend with the Fed as he makes policy, and given the Fed’s fierce defense of its independence, Trump and the Fed may not end up on the same page.

2. Inflation

Tied into monetary policy and the business cycle is inflation. As Milton Friedman famously stated, inflation is always and everywhere a monetary phenomenon.

In 2022 we had an unfortunate brush with high inflation, the highest rates seen in over 40 years. And that was due to the federal government’s stimulus spending, aided and abetted by the Fed, which boosted its balance sheet to accommodate those trillions of dollars of spending.

While that boosted the money supply, the Fed did make at least some effort to bring the money supply down. But money supply growth is again on the upswing, rising from a low of $20.6 trillion in October 2023 to $21.3 trillion in October 2024.

Perhaps not surprisingly, that increase in the money supply is causing inflation figures to come in higher than the Fed’s expectations. Now the Fed finds itself in a tough position.

If the economy sours, the Fed’s natural reaction would be to try to stimulate the economy through monetary policy. But if that boosts inflation further, that would be politically unpalatable.

Still, the Fed values its independence, and it’s not unreasonable to think that Fed Chairman Jay Powell might decide to engage in monetary stimulus even if rising inflation might hurt President Trump’s approval rating. After all, Trump has all but confirmed that he’s going to replace Powell when his term as Chairman ends in 2026, so what does Powell have to lose?

3. Congress

Another issue facing President Trump is his narrow majority in Congress. He has already started pulling from Republican Senators and Congressmen to staff his administration, which could hamstring him early in his term once those Senators and Congressmen resign.

Trump can’t afford to lose too many votes if he wants to enact bills that would push his economic agenda, which could limit the size and scope of what he wants to accomplish. And with several Congressmen already leaving to join the administration, the Republican majority in Congress could be very slim for the first several months of Trump’s term.

Even if Trump wanted to accomplish a lot to fix the economy in his first few months, that slim majority could stymie him.

There’s also the fact that the Senate will be consumed with Trump’s nominations to key posts. And given the controversial nature of some of his picks, that drama could overshadow more productive endeavors.

Slim Hopes, But Don’t Despair

While it’s not guaranteed that Trump will be able to provide the immediate shot in the arm that many Trump voters expect, it doesn’t mean that all hope is gone.

Trump could very well preside over a resurgence of the US economy. But with the way things are headed, with continued problematic inflation, slowing manufacturing, and a weakening labor market, he might have to get through a recession or slowdown first.

The potential for recession is always present, but fears of recession today are growing. And if a recession were to occur, Americans need to be prepared for it.

If you believe that President Trump will ultimately be helpful for the economy, maybe you’re looking forward to the windfall you believe will occur. But if recession occurs before then, how would you react?

The 2008 Presidential election occurred with the 2008 financial crisis as a backdrop. Markets fell by over 50% between October 2007 and March 2009, with 1 in 4 Americans estimated as having lost over 75% of their net worth during that period.

Yes, the US economy could end up doing better by the time President Trump’s second term is up, but what if a recession like 2008 occurs in the interim? Are you prepared for that possibility?

Many Americans have already taken steps to try to safeguard their savings by purchasing precious metals like gold and silver. Safe haven demand for gold remains strong, and prices remain elevated.

If you’re looking for a way to possibly safeguard your savings, maybe now is the time to start thinking about gold and silver. Both metals have seen double digit price growth this year , and if the economy continues to weaken, both could see higher prices in the future.

Goldco has helped thousands of customers benefit from owning gold and silver over the years. With over 6,000 5-star reviews and over $2.5 billion in precious metals placements, we have worked hard to become one of the top gold and silver companies in the country.

If you want to explore the possibilities of putting gold and silver to work for you, call Goldco today to talk to our precious metals specialists and learn more about the benefits of gold and silver.