Trump Will Bring Change for Business, Economy. Darden Experts Have Ideas.

From taxes to tariffs, trade to regulations, change is coming for business and economic interests during the second presidency of Donald Trump.

The Darden Report checked in with Darden School of Business experts to get reactions on some areas that seem certain to be affected by another Trump administration, combined with a Republican-controlled Congress.

Today, Rodney Sullivan, executive director of the Richard A. Mayo Center for Asset Management, addresses inflation risks and implications for investors.

Darden lecturer Steve Soltis, co-founder of strategic communications consultant Arvo Advisory, addresses the importance of effective corporate communications in an environment of potentially rapid changes. Arvo Advisory works with Fortune 500 CEOs across the consumer goods, hospitality, banking and retail landscapes.

Sullivan on Inflation Risks

Although inflation has been moderating this year driven by several tailwinds including increased productivity and an economic slowdown in China, risks to the inflation outlook have risen. The combination of the Federal Reserve continuing its aggressive easing path by lowering its key interest rate, along with a unified Republican government, warrant a review of the potential impacts on economic growth and inflation.

The commonly held view is that inflation has essentially been vanquished and will continue to move gradually downward to meet the Fed’s 2% annual inflation target. However, there are key risks to this view. First, it appears that U.S. fiscal policy under Trump will focus on expansive tax cuts (for corporate and households). Such cuts, especially if not offset by spending reductions, could widen the fiscal deficit. Another policy proposal includes new import tariffs.

Trump’s goal is to reduce trade deficits and encourage domestic production and he may very well achieve his intended outcome. However, retaliatory measures from trading partners could ignite a trade war, bringing inflationary consequences. Altogether, the combination of stimulative fiscal and monetary policy, alongside stiff import tariffs, may coalesce to push both economic growth and inflation higher.

The risk regarding monetary policy is that the Fed has declared “mission accomplished” too soon in the battle against inflation and the 0.75 percent rate cuts since September are overly aggressive and jeopardize the progress made on inflation.

It’s important to note that overall, the stimulative fiscal and monetary policies are a positive for nominal U.S. GDP growth and U.S. companies’ earnings. However, they are a negative for the U.S. public deficit and debt trajectory. The bond market appears to have some concerns here as the benchmark 10-year Treasury yield has risen 55 basis points since early September to 4.3% currently.

So while rising future inflation is not a given, the above suggests that we could see further progress on disinflation stall, causing the Fed to react. Higher deficits driven by lower tax rates, stiff import tariffs, and stimulative fiscal and monetary policy may be a policy elixir that leads to “echo-inflation” — another period of unexpected inflation. For now though, the US economy remains resilient, labor productivity gains driven by investments in AI are providing structural tailwinds that support economic growth while working to contain inflation.

Sullivan on Investment Implications

So, what are the implications for investors? Stock investors’ concerns about tariffs and larger budget deficits have been overshadowed by a regime change to a more pro-business climate promoting tax cuts and deregulation. The bond market, however, has not been cheering as evidenced by recent rising real yields driven by prospects for higher nominal economic growth and higher budget deficits. Expect some stock and bond market volatility in coming months as markets work to sort through the fog imparted by a coming policy regime shift.

A diversified portfolio should include assets that protect investors from unexpected inflation. Chief among these are Treasury inflation-protected bonds (TIPS), whose principal adjusts up (or down) to keep pace with changes in inflation while paying a fixed rate of interest. Though not assured to protect against inflation, other assets to consider might include commodities, real estate and stocks. Depending on the overall economic environment, the prices of these assets typically increase in value when inflation rises. However implemented, protecting against inflation should always be considered in portfolio construction.

Soltis on Communications Strategies

Darden School of Business lecturer Steve Soltis is a corporate communications expert who has worked at The Coca-Cola Company and UPS. (Contributed photo)

Most astute business leaders were not caught flat-footed by the national elections. Their corporate strategy, communications and government affairs teams have run extensive scenarios on either outcome and have had plans and messaging in place for a while now.

Externally, the bulk of messaging, especially for businesses in the healthcare, defense, energy, banking, technology and global supply chain spaces, will be focused on how the organizations have built resilience into their operating and business models.

You’ll also see a lot of activity around explaining their evolving 2025-2027 strategic plans and how they are positioned to work not only with the new administration in Washington but with new administrations around the world, of which, of course there are many. Media relations, government affairs, and investor relations teams in particular, will be incredibly busy prepping executives for media, investor and public policy engagements over the next few months.

On the internal side, the same messaging will apply and we’re already seeing CEOs sending out company-wide emails and other communication about how they are positioned to work with these new administrations. At the same time, smart leaders will need to address a range of issues that are top of mind for employees, including reaffirming their commitments to core values of inclusion, diversity and environmental protection.

All that said, I’m not buying the narrative that businesses are panicking or shocked by any of this. Not the smart ones anyway. They’ve had plenty of time to run those scenarios and build plans and appropriate messaging to support those plans.