Donald Trump, the recently re-elected president, may be common, but he inherited a country’s economy that was indistinguishable from the one he encountered when he last entered the White House.
With a Republican majority in the House two years later forcing saving restraints, former president Barack Obama chose to stay in business with minimal inflation and interest rates, despite having presided over the slowest socioeconomic recovery in the post-war time. However, his choice to not overshadow the size of his earlier management stimulus package in the wake of the Great Recession and forcing spending restraints, led to Trump’s election with low inflation and interest rates. Trump then added a potent spice to the market to cause steady job growth and economic development.
Trump did but during his first name, from 2017 to 2021, without bringing higher interest rates or inflation. Eight years ago, he oversaw business restructuring, first through the senior unit and then with Congress. Through his 2017 Tax Cuts and Jobs Act, the second Trump presidency even simplified the tax code and reduced the corporate tax rate to the European average.
Before the COVID-19 pandemic, Trump probably achieved the best business in years. During Gallup’s fifty years of polling this parameter, Americans at the time reported the highest levels of confidence in their financial leads.
By almost every other measure, the business of 2025 is a unique creature.
Our repeatedly low poverty rate, which is a mixed bag, is the only positive aspect. The economy has effectively maintained total employment as a result of the remarkable demographic transition of boomers retiring from taxpayer-funded retirement and fewer young people joining the workforce. Even after the Federal Reserve began its most pronounced economic tightening in 40 years.
The unemployment rate dipped from 4.2 % to 4.1 % in December, close to our half-century low, the final full month of former President Joe Biden’s four-year White House run. Since the stagflationary contraction of 2022, which has consistently been less than 3 %, the economy has also recovered.
The rest of the market is explicitly suboptimal.
Consumer price index inflation increased to 2.9 % in the year to the end of December, up from the September low of 2.4 %, despite Biden’s claim of victory over the Fed’s efforts to combat inflation. Core CPI, which excludes volatile food and energy types, has increased yet further, reaching 3.2 % annually. The Fed’s chosen gauge of core personal consumption expenditures inflation has reached its highest level in eight months, reaching more than 2.8 %.
Clearly, the Fed’s early reduction of the federal funds rate by 75 basis items has certainly caused interest costs to actually ease. The 30-year fixed refinance rate, which was close to 6 % when the Fed cut its first level in September, has risen up to close to 7 %. The 10-year Treasury yield increased significantly from a September low of 3.6 % to more than 4.8 % earlier this month.
Damningly, bond markets somewhat rose as a result of Scott Bessent ‘ testimony to a Senate committee during his confirmation hearing as the candidate for Treasury Secretary. The yield on 10-years decreased slightly, and it maintained a level of 4.6 %. Traders who are confident in Bessent to repair the disaster left behind by Bidenomics in particular and his then-ex-former Treasury Secretary, Janet Yellen, even sigh.
Bessent will be the recipient of Yellen’s error in choosing to double the proportion of short-term loans funded by the government to almost a third of our national debt. Bessent will be in charge of financing a federal loan that has also soared when that loan matures into an environment with much more inflated interest rates than Yellen enjoyed when she decided not to switch in long-term lows.
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If no price breaks and other TCJA provisions are extended, the ticking time bomb of rising fees will hit most Americans. Without congressional action to extend the bill, plus Trump’s signature, 62 % of Americans would start the 2026 midterm election year with a tax increase, with the exception of the individual and estate tax provisions of the TCJA expiring at the end of this year.
Trump has now demonstrated his ability to spur economic growth while maintaining the value of the dollar as the reserve currency of the world. Citizens made apparent in 2024 that it was the economy, more than any other subject, that allowed Trump to recreate his political job. He has no time to waste trying to kill a many different financial beast from when he did it in 2017.
