Wealth management
Washington watch Q&A: What’s next for markets and policy?
TIAA experts analyze how Republican splits over Medicaid and tax policy could impact markets and the economy.
Summary
- President Trump’s first 100 days triggered significant market volatility, with the S&P 500 dropping 17% initially, though markets stabilized after the administration showed responsiveness to negative market reactions.
- Despite Republican control of Congress and the White House, a narrow House majority and intraparty divisions are complicating major policy initiatives, particularly around tax legislation and spending cuts.
- While Social Security and Medicare appear protected from cuts, the Social Security Administration faces operational budget reductions, with growing concerns about both customer service impacts and the program’s projected 2033 funding shortfall.
From market chaos to calm?
President Trump’s first 100 days in office were a roller coaster—and not the fun kind. The Standard & Poor’s 500 stock index fell 17% before rebounding 12%. Yields on 10-year U.S. Treasury bonds bobbed from 4.5% to 4% and then back to 4.5%.1,2
That said, Trump has demonstrated a sensitivity to how markets react to his policies. For this reason, TIAA’s Chris Spence and Niladri “Neel” Mukherjee are hopeful the next 100 days (and beyond) may prove less dizzying.
Spence, TIAA’s managing director for federal government relations, and Mukherjee, TIAA Wealth Management’s chief investment officer, recently held a webinar for TIAA Wealth Management clients, where they recapped the new administration’s first 100 days and looked ahead to what investors can expect moving forward. Below is an excerpt from their conversation, edited and updated for length and clarity:
MUKHERJEE: This has certainly been an eventful 100 days of a new presidency. Chris, you live and work in Washington, D.C. What are your big takeaways?
SPENCE: Chaotic is the word I’d use to describe it. It’s been very fast paced. They’ve executed quickly. We’ve seen 142 executive orders during the first 100 days, which exceeded [President Franklin D. Roosevelt’s] record of 99. Many of them were focused on the economy and tariffs and have caused some of this volatility.
MUKHERJEE: Republicans now control both the U.S. Senate and House of Representatives, in addition to the White House. Yet, there hasn’t been much action from Congress.
SPENCE: Despite the trifecta, it’s still challenging for Republicans in Congress to get things done. The problem for Republicans is their majority in the House is slim—about seven members right now. Back in 2017, they had around a 40-member majority. There’s also a rift between more moderate Republicans and more conservative Republicans.
Despite that rift, they managed to pass President Trump’s “big, beautiful bill” in the House just before the Memorial Day weekend. The bill extends tax cuts, increases defense and immigration spending, rolls back some of the energy provisions enacted by the Biden administration, and raises the debt ceiling by $4 trillion. Now it goes to the Senate, where it’ll likely undergo some changes.
SPENCE: Neel, from your perspective, how are investors reacting?
MUKHERJEE: Early this year, there was some level of optimism in the marketplace from investors. But the range of outcomes was quite wide because there are certain aspects of the Trump agenda which are stimulative for the markets—good for the markets—like tax cuts or deregulation. On the other hand, immigration and tariff policies are seen as more negative for the financial markets. The Trump administration decided to lead with tariffs this time around, which was a surprise. Not only that, unlike in 2018, the target wasn’t just China. This time around, it was against the whole world—friends, allies, and enemies, so to speak. That was a big shock to the financial markets.
So, you had a situation where the S&P was kind of chugging along. Then, it peaks in February and suddenly drops by almost 20%. This was a signal to the new administration that things might not be right, or this might be really harmful and detrimental. Since then, the administration has been de-escalating in words and actions, and the markets are bouncing back.
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MUKHERJEE: Chris, can you talk about the tax bill and some other items on the Trump agenda?
SPENCE: In 2017, the last time they had the trifecta, Republicans were able to move forward some of the most historic tax legislation in close to 30 years. Many individual tax provisions in that bill are set to expire at the end of 2025. With midterm elections coming in 2025, the last thing Republicans want is getting blamed for tax increases.
To get tax legislation done, they’re using the reconciliation process, which allows them to move a bill through Congress without needing the 60 votes in the Senate—so they can bypass the filibuster, which means bypassing the Democrats. However, this doesn’t guarantee Republicans will have an easy path. I mentioned the narrow House majority and intraparty divisions. While House Speaker Mike Johnson was able to find enough common ground to overcome these obstacles, we’ll now see more divisions that exist between the House and the Senate.
Several Republican senators aren’t happy about the Medicaid cuts in the House bill, which the House instituted to help cover the cost of the bill. [Medicaid provides free health insurance for low-income adults and children, whereas Medicare is the federal health insurance program for those age 65 and older.] Some others aren’t fans of the increase in the state and local tax [SALT] deduction cap, which goes from $10,000 to $40,000. There are several House Republicans, especially from blue high-tax states in the Northeast and California, who needed to see that increase to vote for the bill. There aren’t any senators with that much of a stake in SALT, so it will be interesting to see how they approach it.
Something else on the table has been municipal bonds—removing the ability to deduct interest from your municipal bonds from federal taxes. The House bill left this alone, and it seems likely the Senate will too.
MUKHERJEE: Chris, talk a little bit about Social Security. Our clients want to know what’s going on with Social Security in the context of the tax bill and
SPENCE: President Trump has been very clear that he’s not cut cutting Social Security. He’s not cutting Medicare. Medicaid, as we discussed, is a little bit up in the air. The Social Security Administration, the federal agency administering the program, itself is experiencing cost cuts. Like many other agencies throughout the federal government, they’re not immune to what DOGE [the Department of Government Efficiency] has been doing.
Interestingly, there was a letter sent by 15 House Republicans to the DOGE folks that said: Could you please stop cutting the Social Security Administration’s budget? They’re concerned this is going to impact customer service and have an impact on many people who need to get in touch with Social Security.
The other issue with Social Security is the looming shortfall in 2033, when Social Security is estimated to only be able to pay 80% of what it’s paying today. While we can hope Congress will deal with this sooner, Congress generally works on deadlines and takes things right up to the deadline. I think that’s what we’re going to see with the Social Security fix. So, it’d probably be a few years before we address that.
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1 Yahoo!Finance, based on the S&P 500 Index,
2 The Federal Reserve Bank of St Louis FRED, “Market Yield on U.S. Treasury Securities at 10-Year Maturity, Quoted on an Investment Basis,”
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