LIVE MARKETS-Seven policy risks that could spoil the party

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SEVEN POLICY RISKS THAT COULD SPOIL THE PARTY

Questions remain over exactly what policies markets will have to contend with in 2025.

To kick off the new year, Barry Gilbert, asset allocation strategist at Carson Wealth, came out with a note offering what he sees as seven policy mistakes that could undermine what his firm believes will be a bullish policy outlook.

The risks that Gilbert sees are:

1) The Federal Reserve keeps policy too tight

2) Tariffs stoke inflation

3) Internal division within the Republican Party delays or limits policy implementation

4) Deregulation clashes with the Supreme Court’s Chevron reversal

5) Immigration policy stunts economic growth

6) Unpredictability dampens animal spirits

7) Fed independence

As Gilbert sees it, immigration policy is the most underrated risk, but still secondary to monetary policy and tariffs when it comes to the absolute level of risk for markets.

"Immigration reform is a positive goal, but also comes with some risks. How high those risks are depends on actual policy. It would take a fairly large mistake to have enough of an impact on the economy to weigh on markets, but the potential for a large mistake is non-trivial," he writes.

As for Fed independence, Gilbert considers this to be a very small risk, but with the consequences of a misstep potentially huge.

"This one is unlikely to be a slow burn. If Trump oversteps, I would expect the market response to be unmistakable."

Overall, Carson's view remains squarely in the camp that policy remains a tailwind. However, Gilbert says that "Donald Trump was elected to be a disruptor, and while disruption can be valuable, it also can often come with unintended consequences."

(Terence Gabriel)

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