The whole “Trump Trade” thing is in full effect. 

The markets jumped Wednesday as investors reacted to the news of a second term for President-elect Donald Trump. Stock futures soared, Treasury yields edged higher, and the dollar rose to its strongest level in a year. While markets generally tick up after close elections, investors seem to believe Trump 2.0 will help spur growth and ease regulation. But, for some advisors, there are still meaningful questions that need answers — especially around the particulars of his tax policies.

“There is a lot of uncertainty,” said Brian Spinelli, co-CIO at Halbert Hargrove. “Post-election, we are looking for more detail.”

They’re Eating the Tax

Advisors are pointing to the Tax Cuts and Jobs Act, a first-term Trump-era rule that changed deductions and tax credits for businesses, which is set to expire after next year. An increase in personal and corporate taxes, reduction in deductions, and a massive decrease of the estate tax exemption could take a toll on long-term and tax planning, according to Sean Williams, CFP, an advisor with Cadence Wealth Partners in North Carolina.

Republicans also took control of the Senate, giving the GOP the upper hand in tax and spending stand-offs on Capitol Hill, which will likely loom large over future policy. “The real impactful story to watch is TCJA,” he told The Daily Upside.

Born to Run. Taxes aside, the stock market is on a tear, and traders are already getting out their track shoes. They expected the market to have more room to run after a Trump win, according to an October Bloomberg survey:

• Almost 6 in 10 respondents anticipate the markets will perform better than they currently are performing under a Trump administration.
• The price of bitcoin is expected to rise to a new record above $80,000 by year-end. 
• About a year from now, some 57% of respondents said they expect the price of gold to be higher under Trump.

“Trump is pro-growth, so overweighting a portfolio towards the US may not be a bad idea,” said Ashley Folkes, a CFP and planner with Farther. Small-cap stocks in sectors like manufacturing, industrials, and technology could be the biggest winners.

Playing the Trump Card. With the stock market at an all-time high, it could also be the time to use tax strategies, like donor advised funds, to help rebalance gains, said Jeremy Keil, a planner with Keil Financial in Wisconsin. “I’ve seen more people lose money by changing their portfolio because of politics than make money,” he told The Daily Upside. Still, “with stocks up and bonds sideways, you may have a lot more risk than you thought you did.”

Alternatives are going mainstream.

With investor interest in the asset class skyrocketing, Franklin Templeton is staking its claim as a top name in the alternative investing space, which is now expected to top almost $30 trillion by 2029. The San Mateo, California-based asset manager created a new executive position in its Wealth Management Alternatives business this week and poached George Stephan, a top executive who previously worked at KKR and Morgan Stanley. 

“There’s so much activity on the private side now that you really just can’t ignore it if you want a diversified portfolio,” said Jacob Miller, co-founder of private markets investment platform Opto Investments.

Alt Vibes? 

The new role is tapping growing demand for new alt products from financial advisors. This year, more than half of RIAs and independent broker-dealers said they would recommend non-traded alternative investments, up from just 25% in 2020, according to CNL Securities’ 2024 survey.

Over the past decade, an advisor looked like a “genius” for holding low-cost, 60/40 portfolios, said Miller. Not anymore. “Once inflation and Fed interest rates increased, it was like the tide went out and that portfolio wasn’t wearing shorts,” he said.

Private credit is emerging as one of the more attractive segments, according to a Morgan Stanley report. The research also found:

• At the start of this year, private credit accounted for roughly $1.5 trillion in assets worldwide.
• Private credit is expected to become a $2.8 trillion asset class globally by 2028.

Ctrl+Alt. Franklin Templeton has grown to be one of the largest managers of alternative assets globally; it’s acquired multiple alt firms since 2018, including Benefit Street Partners, Lexington Partners, and Clarion Partners. As of this June, alternatives made up roughly 16%, or $264 billion, of Franklin Templeton’s $1.65 trillion in AUM. “We have been deliberate about building our capabilities,” Franklin Templeton EVP Adam Spector said in a release. 

There are definitely some gaps Franklin Templeton could fill as plenty of the mega-firms are still trying to crack the alternatives code, Miller said. Fidelity is a relative newcomer, with about $70 billion in alternative assets under administration as of March. Vanguard liquidated its Alternative Strategies Fund last year.

ETFs are like Pringles: Once you pop, you just can’t stop.

Exchange-traded funds have been steadily chipping away at the market share of the almighty mutual fund, and after roughly 30 years, now make up almost 30% of total invested assets in the US. The latest product developments, like new share classes and crypto funds, are adding to the popularity and giving investors more options. It’s safe to say that in the next two decades the asset split could be closer to half, according to ETFGI founder Deborah Fuhr. 

“It’s one of these things where once you try ETFs, you tend to use them more and more,” she told The Daily Upside.

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