Welcome to the WC, wherein you’re trapped in my mind for eight to ten minutes weekly.
I’m writing this as US election results continue to roll in, but at this point, a Trump victory looks highly likely.
Today’s edition will build on July’s investment climate analysis given a Trump win, so you may want to begin there.
- What has Trump Promised?
- Residential real estate
- Estonia’s startups under threat
- Increased demand for tangible assets
- Everything else
And just in case Harris pulls out the W, here’s my analysis.
Let’s go.
Table of Contents
What has Trump Promised?
Let’s all get on the same page from an assumptions point of view.
Former President Trump made many promises during his campaign, but we’ll focus on and take these as a given*:
Tariffs
The specifics are loose, but Trump has proposed widespread protectionist tariffs. The best guess is they’ll look something like:
- China – 60%
- Mexico – 10%
- EU – 10%
- Everywhere else – 20%
Trump has mentioned even higher tariffs in some cases, such as up to 100% or even 200% on certain goods from Mexico, particularly automobiles.
Mass deportation
Trump has promised to deport around 11 million undocumented immigrants from the US. These people mostly live and work in New York, Southern California, Texas, Florida, Chicago, DC, Atlanta, and Arizona. They comprise between 5% and 8% of the population in those areas.
Tax cuts for the wealthiest Americans
Trump has promised to tax cuts for the wealthiest Americans that will lead to an average of $35,000 more in the one percent’s pockets every year.
These will come into place within the first year of his presidency.
End the war in Ukraine
Trump has promised he’ll end the war in Ukraine on day one. A negotiated peace is unlikely, but he will almost certainly cut all US aid to the country.
*All or none of these might happen, but we’ve got to start somewhere.
Residential real estate
Both mass deportation and tariffs will impact American real estate.
- Deportation will dampen demand for homes as current owners and potential buyers are forced to leave the country
- Widespread inflation in the 6% to 8% range is expected given the level of tarrifs Trump has promised. This inflation will force the Fed to hike rates perhaps 1.5% to 2.0%
Housing prices may face a double whammy under Trump as demand destruction pushes prices down.
What does this look like?
Ten metros will contribute around half of the proposed 11 million deportations. If the deportations are successful, these metros will lose between 5% and 8% of their population.
Let’s see what that does to home prices there.
But wait, there’s more. Imposing broad tariffs will almost certainly lead to inflation, meaning mortgage rates will likely approach 9%.
That stacks onto the impacts from deportation to push prices down further in those areas.
Prices in New York may be less elastic, and places like Phoenix may be more elastic, but the trend here is pretty straightforward.
If you’re looking to buy a US home and are happy to wait a couple of years, you should consider some of the metros above.
If you want to put on a true Trump real estate parlay, I think prices in Florida and Texas will sink further as he enacts policies that undermine progress regarding climate change. Expect the more aggressive scenarios I painted in last year’s analysis of the impact of climate change on real estate prices to play out.
Estonia’s startups under threat
Estonia has been a European innovation powerhouse over the last ten years as its leapt ahead with founder-friendly policies and digitalization. Those initiatives have been an unmitigated success for startups.
So how does a Trump administration play in here?
Most strategists agree Russian President Vladimir Putin won’t stop with Ukraine, and already-friendly Moldova and Belarus could be next on the menu.
Once he’s consolidated power amongst friendly countries, Putin would likely intensify efforts to destabilize NATO’s eastern members, primarily targeting the Baltics—Estonia, Latvia, and Lithuania—given their strategic locations. While direct military action may be less probable due to NATO’s Article 5, Russia could leverage hybrid tactics, including cyber warfare, disinformation, and political destabilization efforts to erode trust in NATO’s protective guarantees.
While direct miltary action in Estona will depend on how the EU reacts (it must strenghthen its posture significantly), that’s not the only lever Putin can use to directly or indirectly undermine the Estonian startup ecosystem.
Estonia is highly digitalized, making it a prime target for Russian cyber activities, especially if Putin’s influence over Eastern Europe is emboldened. The Estonian government and private sectors, particularly the startup ecosystem, would likely experience heightened cyber-attacks, prompting government and tech leaders to increase investment in cybersecurity. Startups specializing in digital security could thrive, supported by both public and private funding.
While it’s unlikely, a fullscale invasion would compel NATO to intervene, and a drawn out war would be unavoidable.
And it would thoroughly undermine the startups ecosystem.
Some companies would relocate to nearby Germany, the Netherlands, and so forth, but a great many founders and employees of tech companies are milliary aged males that would be called on to fight off the invasion.
Increased demand for tangible assets
As tariffs come into effect, wealthy Americans will find themselves with more disposable and investable income. They’ll look for inflation-protected assets to safeguard and grow their wealth.
Tax cuts favoring the top 1% and 0.1% would catalyze a substantial inflow into alternative investments, from traditional areas like real estate and art to newer categories like cryptocurrency and luxury collectibles. While this will increase demand and returns in the short term, it could also amplify valuation pressure and introduce volatility.
Art and Collectibles: With reduced capital gains taxes, investing in fine art, antiques, and other collectibles becomes more tax-efficient. High-net-worth investors may increase demand for masterpieces and rare items as they look to diversify. Owning a piece of history while enjoying tax benefits presents a compelling investment opportunity.
Precious Metals: Reduced taxes on long-term gains could lead investors to allocate more to assets like gold and silver. For those interested in hedging against inflation or currency fluctuations, precious metals offer a non-correlated, tax-efficient safe haven.
Luxury Goods: Fine wines, rare spirits, vintage cars, and other luxury goods could see an uptick in demand. Investments in wine and whiskey offer relatively stable returns, now enhanced by long-term tax advantages. Collecting rare vintages or classic automobiles isn’t just a passion—it’s a strategic move for wealth preservation.
Cryptocurrency: Lower capital gains rates could accelerate interest in cryptocurrency investments among high-net-worth individuals. The high potential gains from established cryptocurrencies like Bitcoin and Ethereum become more attractive when capital gains taxes are minimized. While volatility remains a factor, the prospect of higher after-tax returns may draw more investors into the crypto space.
Farmland and Timberland: Farmland and timberland are emerging as popular alternative assets due to their stable yields, resilience to inflation, and land appreciation. Reduced capital gains taxes may prompt increased investments, particularly from those interested in sustainability-focused portfolios. Investing in land provides both tangible assets and a commitment to long-term value.
Tequila and Other Distilleries: Interest in tequila and whiskey investments, already on the rise, may grow further. The relatively low volatility of these assets, combined with significant tax savings, could attract investors seeking both diversification and stable returns. Distilleries are offering opportunities that blend traditional craftsmanship with solid financial performance.
As demand for alternative investments increases—especially in markets with limited supply like fine art and prime real estate—prices could surge. Higher valuations may lead to a more competitive landscape in acquiring premium assets and could tighten yields in markets once considered stable. Investors will need to navigate this environment thoughtfully to maintain their desired returns.
Everything else
Some closing thoughts and rapid fire ideas that may or may not pan out.
Defense Contractors and Cybersecurity Firms
- Defense Contractors: With increased geopolitical tensions, a Trump administration could bolster defense spending, benefiting U.S. defense contractors like Lockheed Martin, Northrop Grumman, and Raytheon. Investments in these companies could offer growth potential as the government prioritizes border security.
- Cybersecurity Firms: Beyond the Estonian context, cybersecurity investments may see broader growth due to the administration’s focus on immigration enforcement and national security. Companies like CrowdStrike, Palo Alto Networks, and Fortinet could gain from increased government and private sector spending on digital protection.
Infrastructure and Construction Companies
- Freedom Cities Initiative: While he’s not spoken about then recently, Trump’s proposal to build “Freedom Cities” on federal land could create opportunities in infrastructure and construction. Major contractors like Caterpillar, Jacobs Engineering, and Fluor could see increased demand for large-scale projects tied to these cities.
- Industrial Real Estate and Infrastructure: Companies involved in manufacturing or logistics infrastructure, like Prologis and Brookfield Infrastructure, may benefit from increased domestic production spurred by tariffs and incentivized by a renewed focus on U.S.-based manufacturing.
Healthcare and Pharmaceutical Sector
- Healthcare Providers and Pharmaceuticals: Trump’s potential tax cuts for high-income earners could increase disposable income among the wealthiest, leading to higher demand for private healthcare and specialized treatments. Providers of high-end healthcare services and certain pharmaceuticals may experience growth.
- Biotechnology: Given Trump’s healthcare policies and potential deregulation, biotech firms focused on innovative treatments and precision medicine may receive more investment interest as tax incentives make high-growth sectors more attractive.
Renewable Energy Alternatives and Commodities
- Commodities: The expected inflationary pressures from tariffs could lead to increased interest in commodities as a hedge. Commodities-focused ETFs and companies in raw materials could see increased inflows as inflation-protected assets.
- Selective Renewable Investments: While Trump’s policies may favor fossil fuels, the need for energy diversification remains. Select renewable energy sources or green infrastructure companies that are already profitable, like NextEra Energy, could remain attractive, particularly as a longer-term play.
Agriculture and AgTech Investments
- AgTech and Sustainable Agriculture: With tariffs potentially increasing food prices, AgTech firms focusing on efficiency and productivity may attract investment. Companies working in sustainable agriculture or vertical farming—such as AppHarvest or AeroFarms—could benefit as investors look to hedge against food inflation.
- U.S. Agriculture Investments: Traditional agriculture, particularly U.S.-based farmland, may see an uptick in investment as tariffs and immigration policies impact labor availability and production. High-net-worth investors looking to diversify could find farmland an attractive, inflation-resistant asset.
Private Equity in Manufacturing and Domestic Supply Chain Ventures
- Domestic Manufacturing and Supply Chain Reshoring: Increased tariffs on imports may encourage private equity funds to invest in U.S.-based manufacturing and logistics. Companies facilitating the reshoring of supply chains, such as firms involved in manufacturing automation and supply chain software, may experience strong growth.
- Automation and Robotics: With tighter immigration policies, U.S. companies might turn to automation and robotics to mitigate labor shortages. Private equity firms investing in robotics and automation, such as Rockwell Automation or Teradyne, could capitalize on this trend.
Insurance Sector
- Climate and Property Insurance in Vulnerable States: States like Florida and Texas, with high exposure to climate risks, may see shifts in the insurance market. Property and casualty insurance companies could face increased demand for climate-specific insurance products. Firms focusing on risk management in climate-sensitive areas, like The Travelers Companies, may offer niche opportunities.
- Health Insurance: Trump’s potential healthcare policy changes could impact demand for private health insurance. Insurers like UnitedHealth Group may see growth as high-income earners seek premium healthcare coverage in a deregulated environment.
Data Centers and Technology Infrastructure
- Data Centers: With the administration’s focus on national security and increased domestic technology investment, data centers could become essential infrastructure. REITs and companies specializing in data centers (like Digital Realty Trust or Equinix) could experience demand growth as businesses prioritize domestic data storage.
- 5G and Broadband Expansion: Given Trump’s focus on modernization, companies involved in 5G infrastructure and broadband expansion could benefit as Freedom Cities and rural development initiatives require advanced connectivity. Firms like American Tower Corporation and Crown Castle could gain from this push.
Impact on Emerging Markets (as Counterweight)
- Emerging Market ETFs and Funds: If Trump’s policies cause U.S. inflation and potentially weaken the dollar, emerging markets may become more attractive. Investors may diversify into emerging market assets and funds as a counterweight, especially in areas like Southeast Asia, where economic growth remains strong.
Finally, I think now is a good time to buy some chickens for your backyard.
That’s all for this week; I hope you enjoyed it.
Cheers,
Wyatt
Disclosures
