The stock market has been on an upward trajectory for the year, but experts predict that President-elect Donald Trump’s plan to impose tariffs could spell disaster. The main reason is Trump’s proposed 10% to 20% tariffs on all imports into the US and up to 100% tariffs on Chinese imports.
Tariffs will lead to higher prices of goods purchased by Americans, which could be passed on to customers. While some products may have domestic alternatives, not all do. Companies may raise their prices to stay competitive, leading to higher inflation and potentially forcing the Federal Reserve to raise interest rates again.
A trade war between the US and other countries is possible, causing significant harm to US exporters. The situation could be likened to a line of dominoes, where one event triggers a chain reaction of subsequent events.
However, there are variables that could affect the outcome. Trump may lobby for exemptions or loopholes in his tariffs, which could reduce their impact. Alternatively, he may implement tariffs but lift them quickly enough to minimize harm.
For investors, the best course of action is to invest for the long term. Warren Buffett’s advice “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes” remains relevant. By adopting a long-term perspective, investors can ride out market fluctuations and capitalize on future rallies.
Source: https://www.fool.com/investing/2024/11/13/prediction-the-trump-stock-market-rally-is-doomed