Market perspective: What to expect from the next 100 days

Summary

• The full economic impact of tariff turmoil has yet to be felt, according to Niladri “Neel” Mukherjee, TIAA Wealth Management’s chief investment officer.
• There are opportunities for de-escalation of tensions between the United States and key trading partners (including China) and for a Trump policy pivot to fiscal policy and deregulation.
• Against this backdrop, Mukherjee urges investors to stick to their long-term financial plans and resist the urge to time the market.

A four-pillar road map

Last December in TIAA Wealth Management’s 2025 Outlook, Chief Investment Officer Niladri “Neel” Mukherjee argued that political uncertainty was contributing to market uncertainty. Some of the issues Donald Trump campaigned on were pro-growth (like deregulation), whereas others (like tariffs and immigration crackdowns) were not. The issues Trump chose to prioritize as president would determine the road ahead for the markets and the economy.

Trump’s first 100 days have reinforced his view, Mukherjee writes in May’s CIO Perspectives. Trump started with tariffs instead of deregulation. The end results: lower appetite for risk among investors, sagging consumer confidence, renewed fears of inflation, and greater downside risks for employment, corporate profits and household consumption. As of April 29, 2025, the S&P 500 had declined by 5.1% year-to-date (YTD) while the Russell 2000 (U.S. Small Cap Index) had fallen 11% YTD. Additionally, the VIX Index (Wall Street’s favorite fear gauge) has increased from 17 to 24, after spiking to more than 50 at the beginning of April.

Mukherjee says the road map forward revolves around four policy pillars—trade policy, fiscal policy, immigration policy and deregulation. Each has potential to impact markets differently, depending on what Trump prioritizes in coming months. Given the uncertainty, Mukherjee recommends investors stick with their long-term financial plans and resist the urge to time the market.

Read the full version of May’s CIO Perspectives here. A summary is below:

Trade policy

So far, tariffs have been the centerpiece of President Trump’s economic agenda. It’s clear tariffs aren’t simply a tactic to force trade partners to the negotiating table but also a policy initiative designed to generate new revenue and bring manufacturing jobs back home. This heightened protectionism poses risks for investors. It could reduce long-term demand for U.S. assets if foreign investors stop believing in U.S. economic exceptionalism. They’ll also have fewer dollars to spend on U.S. assets. “Foreign countries exporting fewer goods to the United States means fewer U.S. dollars being sent overseas to pay for them,” writes Mukherjee. “Historically, a lot of those dollars wind up reinvested in U.S. stocks, bonds and real estate, which supports prices of those assets.”

That said, President Trump does seem sensitive to consequential swings in equity and bond prices and to the slide in his job approval ratings. Mukherjee points to a more conciliatory tone from the administration on tariffs since the end of April—likely an attempt to calm nerves and reduce near-term risks to the economy and markets. As of this writing, new trade deals have been announced with the United Kingdom and China (the latter boiling down to a 90-day tariff truce), and several other deals are apparently under discussion with key trading partners (mostly Asian countries). “Trade tensions between China and the U.S. aren’t going away,” Mukherjee said. “But the tariff deal announced May 12 is welcome news. For U.S. consumers, it reduces the risk of sharp price increases. For U.S. companies—particularly those that rely on imported goods and materials—it means less pressure on profit margins.”

Fiscal policy

One reason equity markets reacted so positively to the November 2024 election was Trump’s campaign pledge to cut corporate taxes and extend expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA). So far, however, fiscal policy has been deemphasized during the administration’s first 100 days.

That said, Congress is seeking to enact President Trump’s key tax reform priorities via the reconciliation process, which allows the Senate to forgo the 60-vote filibuster requirement so the bill won’t need the support of Democrats. While Mukherjee expects the bill to become law, the timing remains uncertain.

While a focus on tax cuts and fiscal restraint could represent positive developments for the economy and markets in the near term, there are some provisos to this view, according to Mukherjee:

• The stimulus effect of tax cuts could be much smaller than in 2017, given that around $4.5 trillion out of the total $6 trillion in additional deficit over the next decade would stem from the extension of existing tax cuts,¹ thus providing little incremental benefit to consumers.
• The Committee for a Responsible Federal Budget estimates that Senate proposals would cause the ratio of U.S. debt held by the public to GDP to spike from around 100% today to 211% over the next 30 years, compared to the 156% current baseline projection by the Congressional Budget Office (CBO). Markets could begin to express increased fiscal sustainability concerns, which could translate to higher bond yields, lower equity valuations or a weaker U.S. dollar.
• The government’s initial efforts to slash budget spending (run primarily through DOGE) seems to have fizzled—U.S. Treasury’s daily data shows budget outlays are approximately 3% higher than they were at the same point last year. However, a strong contingent within Congress and the White House is likely to push for more sizeable cuts. These could reduce fiscal concerns but with risks to the economy, given many of the targeted spending categories (federal jobs, food stamps, Medicaid, federal contracts, and aid to state and local government) play a key role in supporting the U.S. private sector.

“We think a shift from trade policy to fiscal policy by the Trump administration in the second half of the year could be a welcome development for investors in search of short-term offsets to rising risks to the U.S. economy,” writes Mukherjee. “Part of this optimism could already be reflected in the more positive equity price action since mid-April.”

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