Investments that make sense going into 2025
Going into 2025 there are a variety of reasons to be optimistic. Whether you like or hate Donald Trump is beside the point. Investment in private industry, real estate, and businesses will grow under another Trump administration. There are complex economic arguments to be made in opposition to this statement, but all in all his election is pro-business.
So where should you be positioned to achieve the maximum benefit from your investments?
Our expectation is the yield curve will continue to “normalize” and steepen. It has been inverted, until recently, for too long. As there must be some reconciliation with regard to the national debt, there will remain continued upward pressure on yields. That being said, the shorter end of the curve will likely be brought down by 100-200 basis points through Federal Reserve cuts in the next 24 months. If that happens business activity will perk up even as the government sheds some of the new jobs it picked up during the previous administration. This will balance itself out in terms of job creation and destruction, ultimately with net-positive job growth and at some point say 18 months out provide a lift to GDP.
As the yield curve normalizes there will continue to be pressure on real estate yields to rise as they will have to compete with bonds for investors interest. This is normal historically. It will be painful for real estate investors who are in thin 2021/22/23 vintage deals . I wouldn’t be surprised if the unwinding of these trades resulted in a meaningful impact on markets requiring the new Federal government to intervene.
New opportunities for investment with a new administration.
You might not have voted for Donald Trump. But it’s time to start thinking about what you will invest in as the new administration prepares to take power in 2025.
Businesses that will thrive under the Trump administration, in no particular order, are:
Data center development and construction - Data centers are here to stay. Unless the Internet and AI goes away. Probably not going to happen.
Nuclear and electrical power plants and infrastructure development to support data centers.
Oil and gas companies, from resource identification and extraction to pipelines to transport. Those operating in the United States will be favored. Master Limited Partnerships, because of their tax structures are particularly compelling.
Crypto currencies and crypto related businesses. No I’m not in Doge Coin.
Robotics companies, from defense related to those who focus on the replacement of service oriented jobs.
Independent educational companies and consultants, preschools, charters, and universities - The Trump administration has proposed to eliminate the Department of Education. This could result in major disruption of the educational industry from early education to higher education.
Space related businesses to support a mission to Mars. As Elon Musk was a big supporter of the Trump candidacy, the anticipated government contracts are to be meaningful. These contracts will require subcontractors, vendors, and support companies.
Tesla - This one might be obvious?
Government consultants - If the Trump administration plans to cut as many jobs as they have already suggested with the Department of Government Efficiency (DOGE), then there will be a large number of private contractors to support the missions for the remaining government employees. For example, when the Department of Defense determines there are too many people designing ships, they will let a bunch of people go, who know that business. Then when progress needs to be made, those same people will be hired back as private contractors. This may result in Defense companies such as British Aerospace, Northrup Grumman, Lockheed Martin, receiving more contracts.
Security technology firms (construction, drones, video, contractors) - Not sure how this plays out, but building “the wall” and securing the Southern Border continue to be priorities of the new administration.
Financial firms - From big banks (Goldman Sachs, Morgan Stanley) to smaller financial investment firms, RIA’s, etc will benefit from deregulation as too much paperwork and Federal oversight promoted as “protecting” consumers has created loads of unnecessary work and costs for these firms and consumers.
Opportunity Zones for real estate investment and development - This successful program will likely be a beneficiary of Republican led House, Senate, and Executive branches. This is one I’m involved with and believe there will be a continuation of this program, if not an outright expansion.
These are just some thoughts from an experienced investor and they are by no means meant to be investment advice. Please consult a financial advisor before investing in any new assets or starting any new strategies.
Best of luck in 2025!
John
