February 20, 2025 | Premium Service | In this edition of The Institutional Risk Analyst, we take an initial look at asset allocation in the Trumpian Age. As with his historical analog, President Andrew Jackson (1828-1836), President Donald Trump is a disruptor of all around him, often for the good. Yet the mere fact of change in many sectors of the US economy will create both problems and equally impressive opportunities. What are some of the market sectors that will be most disrupted by the Trumpian Wave of 2025?
As we have been describing over the past several years (“Biden Administration Staggers Toward a Debt Default”), President Trump is requiring all federal agencies to "report up" to the White House. This week the Trump Administration published a new executive order that replaces and expands on Executive Order 12866.
The new EO, "Ensuring Accountability for All Agencies," greatly expands the reach of the White House, OMB and GSA in the activities of the independent agencies. In short, the independent agencies are no longer independent of the Executive Branch. Federal Reserve Chairman Jerome Powell now reports up to National Economic Council head Kevin Hassett and Treasury Secretary Scott Bessent.
Given this latest development from the White House, we think that businesses should recalibrate expectations for the level of friction from federal regulators when it comes to business plans going forward. As we get clarity on new Fed, Federal Housing Administration and Ginnie Mae leadership, we think there will be opportunities to push back or eliminate areas of friction such as Basel III, risk-based capital rules at GNMA, the use of two credit scores and bi-merge in conventional lending, and a punitive view of prepayments at the FHA.
Likewise, the Consumer Financial Protection Agency has been lobotomized and will operate solely to undo years of excessive consumer regulations. We are in the age of magical thinking in Washington. Anything is possible if the financial services industry can but just manage to ask. But what does this mean for investors? It means massive disruption in key markets like multifamily real estate and Treasury debt. Hello.
Multifamily Real Estate