Markets Brace for Washington Policy Battles

Economic affordability, accountability, and the impact of geopolitical tensions on commodity prices serve as the primary drivers of current market sentiment following the recent election. Joe Lavorgna, Chief Economist at SMBC and former Trump White House advisor, observes that while the labor market remains healthy, the anticipated "disinflationary boom" is hindered by the U.S. involvement in Iran. Significant policy shifts appear unlikely over the next two years due to executive veto power and deep partisan gridlock, which Lavorgna suggests may actually provide a stabilizing, albeit contentious, environment for markets. The elevation of long-time advisor Stephen Miller to Chief of Staff signals a "wartime" approach to governance as the administration prepares for legislative battles over the debt ceiling and federal appropriations. Ultimately, the focus is shifting toward the 2028 election cycle, leaving the immediate future defined by political stalemate rather than substantive regulatory change.