Ropes Wealth Advisors is now RWA Family Office, a division of RWA Wealth Partners.
Ropes Wealth Advisors is now RWA Family Office, a division of RWA Wealth Partners.
The Center for Migration Studies estimates there are as many as 8.3 million undocumented immigrants working in the economy. They work in construction, restaurants, agriculture, landscaping and food processing. A mass deportation of these workers could lead to labor shortages and may result in greater inflation. (Click here to read more on the economic effects of immigration reform.)
Another primary theme that could emerge in the stock market this year is a broadening of returns. This would be a big change from the last couple of years, especially here in the U.S., where market returns have been driven by those mega-cap growth stocks like the Magnificent Seven. In contrast, this year, we could see small- and mid-cap stocks start to also perform, and some of the international markets, including emerging markets, gain momentum as investors seek out opportunities in overlooked areas.
Corporate Earnings Must Set the Tone
When we look back over the last few years, it’s remarkable to consider how well the stock market has done given all the reasons that it could have or should have gone down. This year is no different, as we start off 2025 with plenty of concerns. Looming largest are inflation, geopolitical conflict and potential disruption out of Washington. But as we look across the globe at potential opportunities, it reminds us of a famous Warren Buffett quote. He said that in his 80 years of investing, he had “yet to see a time when it made sense to make a long-term bet against America.”
Building Your Wealth and Legacy
What exactly is bitcoin? It’s the world’s first widely adopted cryptocurrency, which allows secure peer-to-peer transactions without relying on traditional banking systems. Unlike services such as Venmo or PayPal, which depend on banks and other intermediaries, bitcoin operates on a decentralized network where transactions are verified through blockchain technology. This means that any two people can send bitcoin to each other directly, without needing a bank’s permission or involvement.
Bitcoin as an Asset Class
Bitcoin is increasingly recognized as a unique asset class distinct from traditional investments like stocks, bonds and real estate. Its characteristics—such as decentralization, capped supply and high liquidity—contribute to its appeal among institutional investors and high-net-worth individuals. While it has gained traction as a store of value, with some investors referring to bitcoin as digital gold, its inherent volatility remains a concern for many potential investors. The cryptocurrency’s price can swing dramatically within short periods, making it both an enticing and risky investment.
Institutional interest in bitcoin has grown, with many hedge funds and family offices adding it to their portfolios. Even Fortune 500 companies have now reported holding bitcoin in meaningful amounts on their balance sheets. This growing recognition reflects a broader acceptance of cryptocurrencies in mainstream finance. However, investors should be aware that bitcoin’s value is largely driven by market sentiment and speculation rather than an intrinsic value or cash flow. Unlike other financial assets, crypto’s value depends on what people will pay for it at a point in time based on what they think someone else will pay for it in the future. It is not backed by anything else, such as tax revenue or corporate earnings.
How To Invest in Bitcoin
For those looking to invest in bitcoin, there are several avenues available:
Potential Changes Under a New Trump Presidency
With the Trump administration filled with crypto-friendly appointees, there is potential for significant changes in how cryptocurrencies are regulated and perceived. President Trump has expressed ambitions to make America the “crypto capital of the planet and the bitcoin superpower of the world.” He has proposed initiatives such as establishing a strategic bitcoin reserve. Such moves could enhance legitimacy and institutional adoption of bitcoin, potentially leading to greater stability in its price.
If Congress were to provide a statutory framework for cryptocurrencies, it could further integrate bitcoin into mainstream finance, making it more accessible to all investors. However, while these proposals are promising, they also raise questions about regulatory oversight and market manipulation risks. As we look ahead, it will be essential for investors to stay informed about these developments and consider how they may impact their investment strategies.
While bitcoin presents exciting opportunities for investment and innovation within the financial landscape, it is crucial for potential investors to approach this asset class with caution and thorough research. The future of bitcoin could be shaped significantly by regulatory changes under new leadership.
Although we don’t invest directly in cryptocurrencies today because of the extreme volatility in bitcoin and others, we will be watching closely to see how new government regulations unfold and how this particular corner of the financial markets evolves.
Two of the biggest issues he ran on were immigration reform and tariffs. We discussed the potential outcomes of changes to immigration policy last month. This issue, we review the tariff proposals put forth in the months leading up to the election while also looking back at the first round of Trump tariffs in 2017.
Our research shows that the proposed new tariffs would have far-reaching consequences for the American economy. According to the Peterson Institute for International Economics, the tariffs would reduce gross domestic product (GDP) by 0.4% to 1.5% and cost typical middle-income households approximately $1,700 annually. The Tax Foundation projects nearly 345,000 jobs lost across the economy.
While some domestic producers might benefit from reduced foreign competition, the evidence suggests the overall economic effects would be negative, with lower-income households bearing a disproportionate share of the burden.
Direct Industry Effects
The impact of proposed tariffs would vary significantly across different sectors of the economy. The automotive industry is particularly vulnerable due to the integrated nature of North American manufacturing. Vehicles typically cross borders an average of eight times during production under the United States-Mexico-Canada Agreement (USMCA), meaning tariffs would compound at each stage, significantly increasing final production costs.
Consumer electronics represents another vulnerable sector. Despite previous rounds of tariffs, the United States remains heavily dependent on Chinese imports for technology products, including smartphones, laptop computers and video game consoles. Any substantial tariff increase would influence prices in these categories.
The experience with steel tariffs during Trump’s first term provides important lessons. According to Federal Reserve analysis, steel tariffs led to higher input costs that reduced employment in industries like agricultural equipment manufacturing and automotive parts production. The negative effects of rising input costs and retaliatory tariffs outweighed any benefits to protected industries.
Consumer Costs
Despite claims to the contrary, it is accepted economic fact that American consumers ultimately bear the primary burden of tariffs through higher prices. For example, a University of Chicago study found that washing machine tariffs during the previous Trump administration increased prices by $86 per unit. The impact extends beyond just the tariffed products—even dryers, which weren’t subject to tariffs, saw similar price increases due to manufacturers’ bundled pricing strategies.
The regressive nature of tariffs is particularly concerning. Lower-income households tend to spend a larger portion of their income on goods that would be affected by tariffs, such as clothing, household appliances and electronics. According to Treasury Department data, families in the bottom 20% of income spend nearly twice as much of their income on these goods compared with families in the top 20%.
Trade Relationships and Retaliation
Historical evidence suggests that trading partners would respond aggressively to new tariffs. During previous trade disputes, China imposed retaliatory tariffs on 58% of United States exports, with an average rate of 21%, according to Peterson Institute analysis. Agriculture was particularly hard-hit. American soybean farmers lost significant Chinese market share, with exports dropping by over 70% during the height of previous trade tensions.
The cost of managing such retaliation has been substantial. The federal government provided nearly $30 billion in subsidies to farmers affected by previous rounds of retaliatory tariffs. Major agricultural states saw their exports to China fall by up to 75% for certain commodities.
Inflation Impact
The proposed tariffs would likely have significant inflationary effects across the economy. According to Bloomberg analysis, the new tariffs would increase consumer prices by approximately 2.5%. This impact would be widespread, affecting both directly imported goods and domestically produced items that use imported components.
The inflationary effect of tariffs can work through multiple channels. When similar tariffs were previously imposed, many companies used them as cover to raise their own prices beyond the direct tariff impact. Research from the Peterson Institute shows that even a modest tariff reduction of 2% could reduce consumer price inflation by 1.3%, suggesting that larger tariff increases would exert correspondingly significant upward pressure on prices.
The Federal Reserve’s response to tariff-induced inflation presents another challenge. The central bank would face a difficult choice between accommodating the price increases through looser monetary policy or maintaining its inflation targets through tighter policy that could exacerbate any economic downturn.
Investment and Growth Effects
The ripple effect from higher tariffs extends beyond direct price effects. The International Monetary Fund estimates that reversing the 2018–2019 tariffs would increase United States output by 4% over three years, suggesting significant negative growth effects from trade barriers.
Short-term impacts have been well documented. Studies show GDP reductions of 0.2% to 0.7% from previous tariffs, with particularly severe effects in export-dependent industries like aerospace manufacturing and semiconductor production. These sectors not only face direct tariff costs but also suffer from reduced access to foreign markets due to retaliatory measures.
Revenue and Fiscal Impact
The fiscal implications of new tariffs are complex. According to the Tax Foundation, previous tariffs generated $233 billion in collections through March 2024. While the proposed new tariffs are estimated to raise between $1.2 and $2.5 trillion over 10 years, these projections don’t fully account for economic damage that would reduce the actual revenue collected.
The Committee for a Responsible Federal Budget analysis shows that a 60% tariff on Chinese imports (floated as a possible policy move) alone could lower projected revenue from $2.4 trillion to between negative $50 billion and positive $300 billion when accounting for reduced imports and depressed economic growth.
Tariff Outcomes
Based on the information available, increased tariffs would impose substantial costs on American consumers and businesses and have a low likelihood of achieving the new administration’s stated goals of job creation and industrial revival. The evidence suggests these measures would generate less revenue than projected due to economic damage, trigger retaliation that further harms United States interests, and place a disproportionate burden on lower-income households.
While some domestic producers might benefit from reduced competition, the overall economic impact would be significantly negative, affecting everything from consumer prices to job creation and long-term growth prospects.
We’ll be keeping a close watch on tariff policy changes and how they might affect your investment strategy. Should higher tariffs be enacted, you may wish to review your budget, particularly if you plan on purchasing big-ticket items that could cost more. As always, we’re here to talk you through any concerns or questions.
The information set forth in this communication is presented by RWA Wealth Partners, LLC (“RWA Wealth Partners”). The contents are for informational and educational purposes only and are not intended as investment, legal or tax advice. Please consult with your investment, legal or tax advisor concerning any specific questions you may have. Past results are not indicative of future performance. The historical return of markets generally and of individual asset classes or individual securities may not be an accurate predictor of future returns of those markets, asset classes or individual securities. RWA Wealth Partners does not guarantee the accuracy and completeness of any sourced data in this communication.
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