Just two days after the election, we were fortunate to have Dr. Quincy Krosby, Chief Global Strategist at LPL, share her insights with our clients and the team. As a key member of the LPL Research team overseeing over $60 billion in assets, Dr. Krosby brings a unique perspective on global capital markets, with a focus on the macroeconomic environment. In addition to discussing the markets, Dr. Krosby shared personal stories from her journey on Wall Street when the industry was especially male-dominated. The event was in high demand and because many couldn’t attend in person, I wanted to share some of my key takeaways of the night about the economic and geopolitical issues affecting the markets after the election.
The Impact of the Election on the Market
Dr. Krosby emphasized that the market is emotionless. It doesn’t care who occupies the White House and so those who maintain a long-term, unemotional approach to investing may do better in the long run. While markets can react to elections in the short term, these temporary fluctuations often settle over time, regardless of which party is in power.
Tax Policy and Government Spending
Dr. Krosby shared that tax policy shifts could occur under the new administration, particularly with the sunset of the Tax Cuts and Jobs Act (TCJA) in 2025. Despite the candidates’ differing perspectives on key issues, they both did not talk about the deficit during the campaign. With U.S. government spending exceeding its revenue, the national debt continues to grow. The Federal Reserve has been vocal about concerns over continued deficit growth, and the lack of discussion on the topic highlights the challenges the Fed and future administrations will eventually need to address.
Geopolitical Tensions
One of the most pressing topics Dr. Krosby spoke about was the potential for conflict between China and Taiwan. With Taiwan at the center of the semiconductor industry, essential for everything from washing machines to toothbrushes, the economic impact of such a conflict would be felt globally. She noted that while new semiconductor factories are under construction in the U.S., Japan, and Germany, these facilities are not yet operational.
The U.S. policy of strategic ambiguity regarding Taiwan has historically left open the question of military intervention. Today the likelihood of direct U.S. involvement is still uncertain, but it would likely be very difficult for the U.S. to justify entering a direct conflict with China over Taiwan. A disruption in the region could have significant impacts to global supply chains and economic activity.
Inflation and Consumer Spending
Domestically, Dr. Krosby reminded us that inflation is not dead. Despite the data showing that inflation is cooling, she stressed that we are not out of the woods yet and the Federal Reserve knows this. The Fed continues to face the challenge of balancing the issue of inflation with economic growth despite resilient consumer spending and a strong labor market.
Looking Towards the Future
Dr. Krosby’s insights remind us of the importance of making informed financial decisions. Election seasons come and go, but at Island Wealth, we remain focused on your long-term goals. For those who couldn’t join us, I hope that these highlights offer valuable perspectives and clarity as we navigate the current financial landscape together.