Episode 55: What the Election Results Mean for Your Finances

The 2024 presidential election results are in. Whichever candidate you voted for, we want to look at the next four years from a purely financial standpoint. In this episode, we talk what the election results mean for your finances, by looking at the market’s historical trends, how potential initiatives will impact the economy, and what changes we might see to financial policies.

Take a listen right here, or head over to your favorite steaming platform!

Credits for Episode 55

Host: Michelle Smalenberger, CFP®

Guest: Rob Stoll, CFA, CFP®

Executive Producer: Anna Lewis

Transcript for Episode 55

Michelle Smalenberger, CFP® (00:07.715)
Hello everyone. Thanks for joining us for episode 55 of Behind the Designs. Today we want to talk about how presidential election results impact your finances. As you probably know, Tuesday was election day and I hope you had a chance to vote. The hard part with our two-party democratic system is that half the population is ecstatic while the other half may not be. But one thing we do want to point out is that the world continues to turn regardless of your political parties.

outcome. And as a reminder, this podcast is really just to share with you the conversations that we have behind the scenes here so that you can hear and see what we’re thinking. Because when news like this comes out, when there is something that we don’t know what’s going to happen, we know that everyone’s trying to absorb and understand what this means for the days and years ahead. So that’s really the goal of today. So we aren’t here to promote either political party or agenda. However,

However you feel about the election results, we want to talk about the practical impacts this election has on your investments and financial plans, both the good that you have to look forward to and maybe some of the things that we aren’t sure of. There’s something in here for everyone. So for this conversation, I want to bring Rob Stoll back to the mic. Welcome, Rob.

Rob Stoll (01:28.126)
Hello, hello, good to be back.

Michelle Smalenberger, CFP® (01:30.123)
Yeah, this is going to be great. This is kind of like the first real deep conversation we’ve had about this aside from, you know, work talk, like election night kind of saying, okay, as we’re like following the results. So this is going to be good. I think everyone’s going to enjoy it. I know I will too. So

Rob Stoll (01:46.548)
Yeah, yep, yep. We’re touching the third rail. Politics, go figure.

Michelle Smalenberger, CFP® (01:49.731)
That’s right. That’s I’m like, we’re doing it. We’re going in. So just as a reminder, Rob manages all our investments as our chief investment officer. This means it’s his job to watch the news, the markets and adjust your portfolios to keep your investments protected. He is quite literally the professional who’s most qualified to talk about the market in light of the election. So let’s get started. We want to talk about a couple of things here. So we’re to talk about market performance, which impacts your portfolios.

And then secondarily, potential policies that can impact strategies in your financial plan. So there’ll kind of be two pieces, two big pieces here. I think just to kind of get us started, you one of the things I was really just hoping for in the outcome of the election is that election night or, you know, soon after that it would be decisive, that we would know whatever way it was going to go. So that just, you know, takes a lot of uncertainty out.

of things beyond uncertainty that we may have of what really is going to happen. So I think that’s something I can say I’m thankful for is just that it was decisive. And so now we can kind of start to see what impact that might have. Any kind of big takeaway, Rob, are you a person who stays up, watches election results late into the night or no?

Rob Stoll (03:08.028)
yeah, yeah, I was up for the whole thing and you know, it’s, it’s, I had a different view than I think most. I think the overwhelming consensus going into election night was we’re not going to know who won. It’s going to get dragged out several days or weeks. I had a hunch that one way the other, we would know pretty quickly. 2 a.m. being quick in this case, as was the case on Tuesday, but.

Michelle Smalenberger, CFP® (03:10.52)
Yeah.

Michelle Smalenberger, CFP® (03:33.698)
Yeah.

Rob Stoll (03:37.228)
But yeah, I mean, to your point, is that is the one takeaway is we know basically know what it’s everything’s going to look like. Except for the House, the House is still undecided. It looks like it’ll go to the Republicans. But I mean, we’re talking about literally one or two seats, if that and it’s still only like, you know, kind of two thirds, one third odds that that actually happens. So.

Michelle Smalenberger, CFP® (04:06.637)
Yeah.

Rob Stoll (04:07.404)
We’ll have to see because that does kind of change the calculus on some things a bit, yeah.

Michelle Smalenberger, CFP® (04:13.949)
Yeah, no, I just always think it’s interesting to hear what people do. You know, it’s kind of like throughout the day you vote, but then you’re like, okay, well, we have to wait till this evening anyway. So you go about life and then kind of check in. So yeah, I think it’s cool. All right. Well, I know you’ve written about this, but just kind of remind us how do elections typically impact market performance kind of impact, you know, that.

Rob Stoll (04:26.806)
Yep.

Rob Stoll (04:37.62)
Yeah, yeah, definitely. So I’ve done a lot of work on this and, you know, just looking back in history. If you think about first term presidents, the way stock markets usually work is you have decent returns in years one and two, but year three tends to be a really, really good year if you look back over all the first terms in history, or at least over the last hundred years or so. And then

usually the election year, year four, it can be mixed. It’s generally still good in line with averages, but generally it’s kind of mixed. And this year, I mean, it has been a banner year all the way around. S &P is up like 25%, which is way above kind of a normal year. And even the lagging parts of the market, like mid cap stocks, small company stocks.

are up mid-teens, emerging markets are up kind of 12, 13 percent. So I mean, there’s been a lot of gains all the way around this year. Bonds are up, but not really as much as what I was hoping. yeah, mean, generally we’ve gotten kind of a really good year, which kind of sets things up interestingly for this, you know, what could be termed a second term of President Trump.

Michelle Smalenberger, CFP® (06:00.838)
Yeah, yeah, it’s interesting because the terms aren’t running back to back. So it’s kind of one term and now coming back. So it’s interesting. can almost do you feel like it can almost feel like another first term in that sense.

Rob Stoll (06:12.488)
It could, yeah, it could, but I mean, just the dynamics of a second term, you know, he can never run again. So it’s kind of, you know, we’ll get into it in a little bit, but, you know, a little bit of a lame duck scenario. you know, there is that, but because, you know, there was a term, there was a different precedent between his first term and second term. There is definitely a different flavor to this second term than we’ve seen really.

Michelle Smalenberger, CFP® (06:34.817)
Yeah.

Rob Stoll (06:42.733)
I came to like the 1800s maybe so yeah.

Michelle Smalenberger, CFP® (06:45.079)
Yeah, yeah, yeah. No, it’s interesting. Well, I guess kind of so knowing like historically kind of what and this is probably everyone’s reminder. Stay invested regardless of who is in the White House. Stay invested because markets do over time move higher, but kind of walk us through what’s happened. So it’s you know, it’s been a couple of days. Walk us through. It’s been a week. Maybe by the time people listen to this. What’s happened in the market since?

Rob Stoll (07:08.597)
Mm-hmm.

Rob Stoll (07:13.322)
Yeah, so the market has reacted very strongly to this, at least here in the US. So if you look at the S &P, mid cap stocks, small cap stocks, I mean, there’s been a very broad based rally the last couple days. And I think that really stems from because Trump won with a GOP Senate and likely a GOP house, the prospect of

Tax cuts is certainly a lot higher than what it would have been if Harris would have won. So there is hope. If you go back to 2016 when Trump won and passed his tax reform, that was a very meaningful boost to company earnings and stock prices are kind of based on earnings and fundamentals. So if people believe that those earnings are going to be higher than what they would have been, then stock prices will go up.

Michelle Smalenberger, CFP® (07:46.701)
Mm-hmm.

Rob Stoll (08:09.6)
We’ve seen a little bit of that in the U.S. The international has been a little bit different. It’s been, know, yesterday, well, Wednesday was not good for international for developed markets or emerging markets. Yesterday was a little bit better. Today, Friday, November 8th, it was it’s not looking so good. And, you know, again, I think that’s because the market is pricing in.

Well, what does a Trump administration mean for trade tariffs and protectionism and, you know, kind of trying to move manufacturing back to the U.S., which has to come from somewhere. So, you know, you’re seeing just a lot of, you know, I’d say not great stock market returns the last couple of days in international. You know, if you look back to 2016, we saw very similar.

dynamic and I kind of turned around right afterwards. So I don’t want to read too much into that. But you know, that’s kind of the initial market reaction.

Michelle Smalenberger, CFP® (09:09.377)
Mm-hmm.

Yeah, yeah. It’s interesting when it moves so much so quickly. Like you said, this year the market has done really well. So then to have I think it’s been the best week of the year in these last few days. That makes a really big, really big difference on top of an already good market. So yeah. So I guess when you kind of look ahead, thinking forward, how do what do you kind of expect from the market kind of under a Trump presidency over the next two, three, four years?

Rob Stoll (09:29.899)
Yeah.

Michelle Smalenberger, CFP® (09:41.216)
kind of global markets, maybe let’s start there. What do you kind of expect? Kind of more of what we’ve already seen in the first week.

Rob Stoll (09:48.03)
Yeah, yeah. So, you know, kind of looking outside the US to start, I do think it’s it is challenging. I’m not going to lie. It’s Europe was looking good over the last couple of years. A lot of their slow growth problems were at least temporarily relieved. But they they really they’re having a lot of problems. And it’s kind of sad, to be honest. You’re seeing Germany is really

their industrial base is getting hollowed out. And, you know, that’s a quarter of the European economy right there. And it’s they’re having a lot of issues. The Ukraine, Russia war certainly has hurt them because they’re very dependent on natural gas prices. And that’s been at least a little bit in twenty two and in twenty three was a big problem. So, you know, I would say kind of Europe, I kind of look at that and I’m like.

I don’t know, that’s not looking too good, particularly if Trump is more protectionist, even against our European partners. Other parts of the developed market world, Japan, I think will be fine. They’re kind of under the radar. They’ve been doing a lot of the right things. I think their economy is a little bit better positioned to kind of take advantage of protectionism, if that is going to happen here in the US. And then some of the other markets like Canada and

Michelle Smalenberger, CFP® (10:54.55)
Mm-hmm.

Rob Stoll (11:16.924)
And Australia are probably going to be fine. They’re resources driven and you know, we’re, still need a lot of resources to kind of power the economy. So, you know, that’s that emerging markets. The big question is what is China going to do? What is that going to look like? And, you know, we have in our models of structural underweight in China because, you know, frankly, they just grew too big, too fast and are going to have to digest this.

They’re trying to reform a little bit, but having Trump in office is really going to make life difficult, I think, for China. So China is going to face a lot of hard choices. They don’t have a lot of room to maneuver. you know, as much as the U.S., you know, and I’m a big believer in diversification and investing internationally and whatnot, but I mean, it really is when you kind of just look at the cold hard facts.

Michelle Smalenberger, CFP® (12:08.131)
You good?

Rob Stoll (12:14.928)
The US just looks so much more attractive than a lot of these other areas right now. And I mean that was the case before Trump was elected, but even more so after.

Michelle Smalenberger, CFP® (12:25.825)
Yeah, yeah. No, I think that’s really helpful though, just to kind of dive into and see. that, yeah, that’s really helpful. How have markets kind of performed under similar administration? So when you think about, you know, whether it’s US or global, whichever one, you know, or both you want to comment on.

Rob Stoll (12:42.708)
Yeah, yeah, sure. So I looked at second term presidencies since World War II. So that is Eisenhower, Reagan, Bill Clinton, George Bush, and then President Obama. And if you look back at the stock market returns in years kind of 1, 2, 3, 4, in those ones, in those second terms, the first two years tend to be

very, very good. So like kind of mid-teens type average returns, very, very strong. Year three and year four have tended to be not that great. So, you know, whether that’ll play out this time, we’ll see. Part of that is part of the math there is during 2008, the last year of George Bush’s term, the stock market fell like 37%.

So that kind of drags the average down. But even if you look at a median, it’s not that great. So what’s interesting to me, though, is yes, mean, historically, the first two years look pretty good. The second two years of a second term, not so much. But just given how strong stock markets have been over the last 12 months, really, and especially this year, I do wonder a little bit whether some of those good returns in the year one to

Michelle Smalenberger, CFP® (13:58.808)
Yeah.

Rob Stoll (14:06.668)
timeframe have been pulled forward a little bit. you know, I, you know, I don’t have any special insight on what the stock market is going to do, but, you know, after such a strong run and a lot of the issues that we still have to deal with, I wouldn’t be surprised if returns kind of take a breather back closer towards the normal or something for, you know, next year at least.

Michelle Smalenberger, CFP® (14:09.699)
you.

Michelle Smalenberger, CFP® (14:28.983)
Mm-hmm.

Yeah, yeah. It’s interesting and I don’t think this is the case, but a president, I mean, this is kind of just a reminder too, but a really good question. If, you know, a president is in office to kind of set policy, kind of set, you know, their theme on, you know, where the country is going, policy, things like that. The market is kind of results of that or looking forward to what, okay, what do we think the results of that are going to be? So it’s interesting that like the first couple of years, you know, typically tend to do well.

But I don’t necessarily, or do you think that the third and fourth years are a product of what they do the first couple years? I don’t know that they are because they’re also forward-looking to probably the potential of the next president. So is it ever really reflective of what the president is doing, do you think?

Rob Stoll (15:19.412)
Yeah, don’t, I not really, I don’t think because I mean, again, looking back at that Eisenhower, Reagan, Clinton, Bush and Obama, you look at second term achievements and and really in all those cases, except for Reagan, there really wasn’t kind of like major policy push through in those presidents, second terms. Eisenhower had a little bit. Reagan, the thing he had was

Michelle Smalenberger, CFP® (15:22.423)
Mm-hmm.

Michelle Smalenberger, CFP® (15:28.515)
Mm.

Rob Stoll (15:47.67)
There was a major tax reform in 1986. So that was very, very significant. you look at Bill Clinton did a lot of things in his first term and then had some issues in his second term with the Republican Congress and some personal stuff. So he was kind of, you know, didn’t get a lot done in his second term. Same thing with George Bush. had, you know, 9-11 to deal with in his first term, did some stuff on Medicare to expand.

to expand that in the first term and second term didn’t really get a lot done. Obama had Obamacare and that was kind of his signature in the first term. Second term was kind of gridlocked. So I mean, the usual cadence of the second terms, if you look back historically is the president is kind of a lame duck. Everybody knows they can’t run again. And, you know, there’s some midterm elections to deal with, but

But people, you know, people in Washington position very quickly for the next election, knowing that there will be a new president. so that is, you know, I think if you have to come up with a consensus for what Trump 2.0 will look like, some scope of gridlock or kind of being a lame duck is there. But, you know, as we’ll talk about in a little bit, I think there are.

Michelle Smalenberger, CFP® (16:51.192)
Yeah.

Michelle Smalenberger, CFP® (16:59.363)
Mm-hmm.

Rob Stoll (17:11.904)
There are, you know, there are a lot of things that could go against that consensus. So, so that’s kind of the way it has been,

Michelle Smalenberger, CFP® (17:19.501)
Yeah, yeah. No, I just think that’s interesting. Yeah, kind of this cycle of what typically happens during, yeah, during presidential terms. I think one of the things, you know, whatever side you’re on, it is a reminder, though, that, yeah, this is his last term, so he can’t run again. you know, whichever, well, however way you’re feeling after the election, you know, some of these facts are kind of just sometimes helpful reminders to say, OK, we know we have four years, but after that, you know, we don’t know. So I think that’s helpful.

Rob Stoll (17:27.724)
Yeah.

Rob Stoll (17:48.074)
Mm-hmm. Yeah.

Michelle Smalenberger, CFP® (17:49.921)
So I guess as far as really kind of the market, that’s really kind of what we’re thinking market wise. Hopefully that gives people, know, one of the nice things is if the market continues to move higher, anyone that’s invested is saving, anyone that’s saving money as an and is invested will benefit in that. So if the market’s moving higher and you are diversified in the market, then you will benefit. So, you know, hopefully.

Rob Stoll (18:13.653)
Yeah.

Michelle Smalenberger, CFP® (18:14.989)
just a reminder that there’s something for everyone. if you’re in your plan continuing to do those things year after year and the market moves higher, that you benefit too.

Rob Stoll (18:18.475)
Mm-hmm.

Rob Stoll (18:25.684)
Yeah, yeah. And just one more thing to add on that. think when you look at the US market returns over the last two years, really, they’ve really just been driven by, you know, kind of what they call the Magnificent Seven, Amazon, Apple, Google, Facebook, companies like that. They have really been driving the market. Their earnings have gone up a lot as part of the whole artificial intelligence or AI revolution that’s kind of underway.

Michelle Smalenberger, CFP® (18:39.683)
Mm-hmm.

Rob Stoll (18:55.564)
If you look at the rest of the market, so take the S &P 500 and take those seven companies out and you look at the other 493 earnings growth has been really stagnant. I mean, there hasn’t been a lot of movement on earnings for those companies. You look at mid-sized companies, small company stocks, same thing. mean, earnings really are at 2022 levels, basically. the rest of the market, surprisingly,

Michelle Smalenberger, CFP® (19:19.661)
Yeah.

Rob Stoll (19:23.628)
you know, as much as it’s up, really has not seen a lot of fundamental earnings growth other than those Mag 7. So I think one of the hopes I would have is, you know, if there is further tax reform, maybe cuts to the corporate tax rates a little bit. Going back to 2016, you saw a lot of the, you know, kind of small cap, mid cap parts of the market do really well because they’re more, they’re much more domestic.

Michelle Smalenberger, CFP® (19:32.077)
to be.

Rob Stoll (19:53.74)
And so, you know, tax cuts on the domestic side help those companies a lot more than an Apple, so to speak. you could see a broadening out in performance, even though, you know, it’s all been good. I mean, they’re up 15, 20 percent, kind of these other parts of the market outside of Mag-7, but they could hold in or maybe do a little bit better than the top of the market.

Michelle Smalenberger, CFP® (20:09.059)
Mm-hmm. Yeah.

Michelle Smalenberger, CFP® (20:21.037)
Yeah. Have you seen that in the first couple of days, kind of this rally that we saw after the election? Has it been kind of a broad rally across different sectors?

Rob Stoll (20:30.572)
Yeah, I mean, it’s the funny thing. mean, as soon as the election was called, small cap futures, stock futures were up like 6%. So small caps were up 6 % on Tuesday. They were up a little bit yesterday. They’re doing decent today. So that is certainly what people are kind of trying to get ahead of is, OK, you know, if there is further

corporate tax reform, this will probably benefit small and medium sized companies and even small businesses a lot more than it’ll benefit Microsoft or Apple or Nvidia. So you are seeing that, but I always caution people not to read too much into early moves. You see it time and time again, whether it’s a Federal Reserve interest rate decision or some major news that comes out that

the initial market reaction gets faded. you know, what seems, conclusions you make during that initial move are, you know, oftentimes wrong. So I think we just have to kind of wait for the dust to settle a little bit, probably through the end of the year and into the early part of January, just because there are other dynamics going on. Fund managers who are maybe underweight equities are going to want to try to

catch up and make things look good. So maybe we get a Santa Claus rally, you know, kind of regardless of what happened with the election.

Michelle Smalenberger, CFP® (21:57.613)
Mm-hmm.

Yeah. Yeah. No, I think that’s just really helpful for people to understand. Because yeah, these are all things we’ve talked about, written about, you know, over the last year or two years. And so it’s interesting. This is why it’s, you know, all of these things happen. Nobody knows what’s going to happen. This is why you stay diversified so that when things change, you’re able to benefit from whatever that is. So I think that’s really a helpful reminder. Yeah. Thank you for sharing that. That was, I think that was really important.

Rob Stoll (22:23.361)
Yeah.

Rob Stoll (22:27.028)
Yeah. Yep.

Michelle Smalenberger, CFP® (22:29.347)
So if we kind of shift to, there’s kind of a second piece and it’s funny because it seems like these are the same thing. They’re so related, you have the market performance, but then there’s policy detail and policy changes and they affect each other, but maybe don’t affect each other. So we’re kind of separating them out here, but this is kind of the financial planning piece. So we have the investment piece, which is the market performance. That’s how is my money growing?

Rob Stoll (22:35.628)
Thank

Rob Stoll (22:43.212)
you

Michelle Smalenberger, CFP® (22:55.563)
And now it’s really kind of this other piece of what opportunities do you have depending on your income, depending on where you live, depending what tax bracket you’re in. This is kind of the second part of tax wise or, you and other impacts too. How will these policy decisions kind of impact your plan and things that you can do over the next several years? Because it’s, it’s, I guess I say several years because when we had the last

during the first Trump administration, those did last for well beyond his presidency. So we’re just now getting to where those would expire at the end of 2025. And so now we’re kind of, you so it can extend beyond this presidency. So I think this is why it’s really helpful.

Rob Stoll (23:33.878)
Mm-hmm.

Michelle Smalenberger, CFP® (23:40.547)
So we’re going to talk through these because I think it also helps people now to kind of have some type of clarity as we’re planning. You we were kind of saying, let’s see what happens in 2025. Let’s see what happens with the election. So this is our chance to kind of say, okay, here’s maybe some insight into what we think will happen or likely. So I’ll let you kind of start, know, whatever topics that may be the one you want to start with policy wise, kind of, you know, what do you think is the biggest one?

Rob Stoll (24:03.435)
Yeah.

Rob Stoll (24:06.796)
Yeah, yeah, I think by far it’s the Tax Cuts and Jobs Act that is due to expire, as you mentioned, at the end of 2025. You know, I mean, just to give some context, is it even set to expire? It’s because of lot of congressional budgeting rules that says if you pass bills a certain way through reconciliation, I think it’s called the Byrd Rule, if I’m not

Michelle Smalenberger, CFP® (24:14.755)
Mm-hmm.

Rob Stoll (24:34.816)
mistaken, the old senator from West Virginia, that you can’t just add to the deficit indiscriminately. There are limits. So the way they kind of get around that to pass these things without a super majority is they pass it along party lines, like 51 to 49, I think was what the Tax Cuts and Jobs Act was. But they have to set an expiration date because when the Congressional Budget Office scores it,

They’re going to say, OK, it’s going to cost X, Y, and Z for those 10 years. But then you’re going to revert back and go back to normal after that. So that is the reason why we even have this in the first place, because that bill was passed not with a supermajority in Congress. So it wasn’t made permanent. That said, with Trump having won this election, it would be absolutely shocking if that tax reform was not extended.

I don’t think anybody has any doubt that he doesn’t like taxes. He talked about it on the trail a lot with like no tax on tips, no tax on social security, no tax on overtime. I don’t know who would be paying tax at that point, but the basic message was tax cuts, tax cuts, tax cuts. that will almost certainly get extended. We don’t know all the different pieces of that.

Michelle Smalenberger, CFP® (25:41.634)
No.

Michelle Smalenberger, CFP® (25:47.747)
Mm-hmm.

Michelle Smalenberger, CFP® (25:53.323)
Okay.

Rob Stoll (26:00.92)
I would, you know, my personal view, I would be shocked if the individual tax brackets moved at all just because he is not going to want to raise taxes on kind of the middle class, so to speak. And if the tax cuts expire as scheduled, there would definitely be a middle class tax hike because of that. So I don’t see that happening, but there’s other parts of it like the state and local.

Michelle Smalenberger, CFP® (26:14.723)
you.

Michelle Smalenberger, CFP® (26:20.461)
Mm-hmm.

Rob Stoll (26:27.404)
tax limit of 10,000 for deductions, which hurt a lot of our clients in Illinois who have big property tax bills and, you know, weren’t able to deduct all that anymore. There is a lot of talk that that’ll kind of revert back to the way it was before. So you’ll, you know, if you’re an Illinois property taxpayer, you may see a nice benefit if that does go away. you know, but a lot remains to be seen. It’s easy to say, you know, for Trump to say, hey, I want

these tax cuts to go through, they got to be made permanent or, you know, extended another 10 years. But, you know, there are budget constraints to doing that. so that’s kind of the big thing, I would say. And then you get into other pieces like estate tax. The current limit before you get hit by estate taxes is pretty high. That would get cut in half if if this tax law expires.

Michelle Smalenberger, CFP® (27:07.225)
Yeah.

Michelle Smalenberger, CFP® (27:25.293)
Yeah.

Rob Stoll (27:25.514)
that’ll probably get extended again. So there are a lot of implications from this.

Michelle Smalenberger, CFP® (27:29.783)
Mm-hmm. Yeah. Do you think, and is a way to kind of account for some of these tax cuts, so if they want tax cuts, you know, one of the things that’s been talked about, I guess, is Elon Musk, you know, the department of…

Michelle Smalenberger, CFP® (27:45.444)
The Department of Government Efficiency, you know, can you tie kind of, okay, we’re cutting over here to make way for these tax cuts. I mean, is that a way to do it? But also, do the cuts have to be so big because we not only have to stop the bleeding of our current deficit and the interest on that, so we would have to cut enough to make room for those tax cuts as well.

Rob Stoll (28:05.876)
Yeah, yeah, well, that’s that is the million dollar question. So, you know, that’s why I say I don’t doubt have any doubt that Trump is going to want to extend these things. But how that is actually done is a question, because right now we’re running fiscal deficits of one point six trillion dollars a year, and which is six percent of the gross domestic product, which is, you know, what our economy produces each year.

You look back historically, we have never ever, ever run deficits this high that were not either in World War II, they were that high, and 2008, nine, 10, coming out of the financial crisis, they were high. But you look in peacetime, growing economies, we’ve never had deficits this high. And if you do just kind of take his tax law, that Tax Cuts and Jobs Act, and you extend it, that is going to…

cost another $450 billion a year, which now pushes the annual deficit to $2 trillion a year and 7.5 % of the gross domestic product. the million dollar question here is, how do you push through those tax cuts without really freaking out bond investors? Because we’re basically printing money left and right now, and it’s like, OK.

Michelle Smalenberger, CFP® (29:20.195)
Mm-hmm.

Rob Stoll (29:30.654)
What is that money worth if you just keep printing it?

Michelle Smalenberger, CFP® (29:32.833)
Yeah. Yeah. If so on that debt side, the debt, the interest, if they did cut a lot of spending and they got that down dramatically, which has been stated that that’s the goal. Does that with that, maybe not automatically, but would that be a really big

impetus for the bond market to actually start doing much better. If that just happened, they cut spending. so now our deficit’s way down, the interest is way down. Does that automatically make bonds perform much better?

Rob Stoll (30:03.98)
It should. I mean, you would think, but they have to be credible plans, I think. you know, it’s I think the bond market would look through a near term increase in the deficit if there was a credible plan to right size the rest of the government. So, you know, even if it’s it’s we’re going to streamline defense, we’re going to streamline health and human services, we’re going to fix Social Security, like whatever it is.

Michelle Smalenberger, CFP® (30:10.2)
Mm-hmm.

Rob Stoll (30:33.548)
If those plans are credible in terms of, know, when the Congressional Budget Office scores it 5, 10, 20 years down the line, if that, if those numbers look good, then I think the bond market will totally look through any near-term increase in the deficit. But, you know, if those plans aren’t credible, then, you know, you just can’t just increase the deficit without having a plan to kind of deal with it. I know there’s a lot of.

Michelle Smalenberger, CFP® (30:48.301)
Mm-hmm. Mm-hmm.

Michelle Smalenberger, CFP® (31:01.251)
Yeah.

Rob Stoll (31:02.699)
of new economists out there, modern monetary theory that say deficits don’t matter, but the reality is they do and they do because they cause inflation. So, you know, a lot of the inflation problem we have had in recent years is because of just outlandish government spending. So it does matter, but yeah, I mean, I do agree if there are plans, the market can look through that, but they have to be credible.

Michelle Smalenberger, CFP® (31:22.243)
Thank you.

Michelle Smalenberger, CFP® (31:31.743)
Yeah, yeah. No, that’s helpful. So we talked about kind of the TCJA, possible elimination of SALT, expanded child tax credits. That’s one I think that we kind of saw in that first package, but that’s probably something again, is kind of a part of those tax cuts. And then you talked about higher estate tax limits extended. And these are all things that as we’ve been doing planning with clients, it’s one of these things, if people are close to these levels,

Rob Stoll (31:44.673)
Mm-hmm.

Michelle Smalenberger, CFP® (32:00.565)
It kind of has been a wait and see what happens, wait and see what happens until the election to see if we have some insight into what 2025 will look like. That’s been the nice thing is that there’s kind of this buffer year after the election and before the tax brackets change or reset back. So it’s actually been set up really nicely so that we could see what we thought would happen. And I’m hopeful and maybe I think we might see pretty quickly if there’s going to be.

action towards extending those tax cuts. So I think that’s going to help people in these planning opportunities to say, okay, yeah, it’s pretty likely or we know that this is happening and that’s just going to help people again, it takes some of that uncertainty out. So now we know, okay, we have four or eight more years of these tax cuts, which again, gives so many opportunities to things like Roth conversions, things like that. So it’s just really helpful.

Rob Stoll (32:53.324)
Yeah, and I mean, that’s that’s I mean, you hit the nail on the head right there. mean, Roth conversions for a large handful of our clients. We have been advocating, let’s get some Roth conversions done because tax rates are low. But we, you know, we really have to kind of do as much as we can in 24 and 25, because after 26, those tax rates go up and the Roth conversion opportunity or the attractiveness of it.

goes down a lot. So, you know, if and when these tax cuts do get extended, for a lot of people that are doing Roth conversions, that’s a huge relief because you can really kind of spread out the timeline that you’re doing these Roth conversions because there is, you know, there’s a tax bill that comes with it. So it’s not a costless exercise, but you can spread that out a little bit. You have a little bit more certainty on where

Michelle Smalenberger, CFP® (33:33.005)
Mm-hmm.

Michelle Smalenberger, CFP® (33:41.507)
Yeah.

Rob Stoll (33:49.612)
know, tax rates will be for the next several years. And that’ll be kind of the interesting thing, to be honest, now that I, you know, literally just thinking about this right now. If they’re just kicked forward 10 years and instead of expiring at the end of 25, it’s the end of 35, then, you know, Roth conversions still look really, really attractive because the tax rates, you know, are going to go up, or you think are going to go up at some point. If they’re extended permanently, then…

Michelle Smalenberger, CFP® (33:58.339)
Thank you.

Rob Stoll (34:17.676)
know, Roth conversions are probably still attractive in a lot of ways, but you’re not facing this, this cliff, so to speak, where if you don’t do them, instead of paying 22 % today, you’re going to pay 28 % after the tax law lapses.

Michelle Smalenberger, CFP® (34:22.093)
Yep.

Michelle Smalenberger, CFP® (34:32.278)
Yeah, and that’s something I don’t think we’ve talked a lot about today. So in order to make those permanent, basically they would need House and Senate to pass that, majority in both of those. Is that what you were saying?

Rob Stoll (34:43.934)
Yeah, I mean, that that would have to be a bipartisan bill for sure. You know, I mean, they could maybe try to squeeze it. It would definitely have to be there would have to be broad consensus on that. So I mean, you go back to Reagan’s tax cuts and I’d have to confirm this. But off the top of my head, I mean, that was kind of a one and done permanent type thing. So and, you know, Reagan did that with a Democratic Congress.

Michelle Smalenberger, CFP® (34:48.529)
Yep.

Michelle Smalenberger, CFP® (34:56.963)
Mm-hmm. Yeah.

Rob Stoll (35:12.276)
So if there is bipartisan effort to kind of, you know, let’s get tax policy where it needs to be, you know, at least on a go-forward basis, then yeah, I mean, that would have to have consensus. If there’s not consensus on that, then, you know, we are looking at cramming it through reconciliation again, and there will have to be a 10-year clock on it so that the CBO isn’t scoring this thing terribly.

Michelle Smalenberger, CFP® (35:41.697)
Yeah. Yeah. And I think that was probably one of the surprising things from the election. I think so many people were focused on the presidency and you know what, which way that was going to go. But to see the Senate, you know, flip Republican and then the House had a small majority. now we’re kind of still waiting to see, I think just all three branches. I think that was something not many people were probably thinking about before. So as you know, always kind of this we’re going to have these checks and balances. So I think that was something I was surprised about.

which can make a big impact in some of these policies that are potentially gonna get changed. So I think that was something interesting that came out of the election that probably not many people or, you know, saw happening.

Rob Stoll (36:23.678)
Yep. Yep.

Michelle Smalenberger, CFP® (36:24.535)
So one other thing I think you had mentioned that we haven’t talked a lot about is just kind of student loans. When we talk about policy, this may be one that if the others are, everyone benefits if you’re investing and saving. This may be one that people don’t get excited about. Talk to us a little bit about student loans, because this is really an area that you focus a lot on too.

Rob Stoll (36:45.94)
Yeah, yeah, I mean just very quickly on student loans that I mean what people need to know and I know a lot of people don’t you know deal with student loans, but I mean the federal student loan system is in absolute shambles right now. So I mean we have like 1.8 trillion of federal student loans out there. The repayment plans that borrowers can be on have changed time and time again. They’re not even

They’re not even loan repayment plans and the kind of common way of thinking where it’s like, okay, here’s what you borrowed. Here’s your interest rate and here’s what you need to pay to pay it off in X number of years. They have all these income driven repayment plans, which in a lot of cases, the payment is so low that you would never ever pay it off with the interest and everything. So there’s been a lot of effort by the Biden administration for the last four years to push.

student loan forgiveness. He came up with a new income-based repayment plan, which is really attractive to borrowers. That has been challenged in courts. There’s an injunction against it. you know, it’s just there’s going to have to be a major reboot. If Harris had won, think it would have just been a muddle along. You know, they’ll kind of fudge things to kind of keep the system going. But

with a Trump administration in charge, I strongly think they’re going to, they have to just kind of look at the whole thing top to bottom. So it’s probably not going to be as attractive to borrowers going forward. Not that the people who already borrowed are going to get hosed because in a lot of these cases people get grandfathered in. But yeah, it’s just, there’s so much uncertainty right now. know, our youngest daughter is applying to college. I’m looking at,

having to fill out the FAFSA. It’s not even ready. It’s usually ready October 1st. It wasn’t available until June during the last FAFSA season. They’re saying December this year. I mean, the whole thing is just in shambles. So, you know, that’s probably more than people want to hear on student loans and whatnot, but it is the reality. It’s a big issue and it’s a big number as well.

Michelle Smalenberger, CFP® (38:59.095)
Mm-hmm. Yeah.

Michelle Smalenberger, CFP® (39:09.479)
I think it may not affect a lot of people who are retired, you know, or have paid off student loans or paid for school outright, but it could affect a lot of people’s kids, grandkids. So I think it’s definitely something, you know, in a lot of people’s plans of do I feel like I should help out? Should I give something to my grandkids, to my kids? I think it’s absolutely something that, you know, and we’ve talked about this in past episodes, ways that you can help and build, you know, that up because…

the education system and paying for it has changed so much over the years. So that’s another episode we did. And so I do think it’s, you know, helpful for people to hear.

Rob Stoll (39:44.202)
Yeah, and OPS, I mean, it’s worth a couple hundred billion in the budget. So again, if you’re looking for how are you going to pay for tax cuts, reforming the student loan system is probably near the top of the list of how you do that.

Michelle Smalenberger, CFP® (39:59.755)
Mm-hmm, yeah, no, that’s helpful. Okay, so now let’s talk about kind of some of these kind of second term initiatives. We’ve kind of talked about a little bit policy, some of these planning things specifically. What do you kind of expect maybe to see just kind of in his second term, some initiatives we might see?

Rob Stoll (40:17.61)
Yeah, yeah. So, I mean, the tax stuff is clearly priority number one, but even beyond that, you you kind of look at what Trump and people around him have been talking about. Infrastructure is a very big thing, and it’s becoming a bigger and bigger issue because of the AI revolution and the power needs for that. We simply don’t have enough electricity generation in this country.

to be able to run these AI models efficiently, or frankly, if everybody’s going to own an electric vehicle, an EV, we don’t have enough capacity for all that. So if you look at what Biden did with his Green New Deal, which is called the Inflation Reduction Act, a lot of that infrastructure spending was really focused on renewables.

and things like that, less so on nuclear and especially not fossil fuel type investments. So, you know, I think a Trump administration is going to, you know, pull the proverbial plug on that a little bit and refocus a lot of that infrastructure spending on oil and gas exploration, nuclear build out. We haven’t had nuclear build out here in 50 plus years.

That is the obvious solution to our energy needs. It’s clean. And you can get a lot of bang out of your buck from that. Grid hardening. And what that is, it’s just looking at its bearing cables. So a lot of the power lines you see are vulnerable. So there’s a lot of effort to kind of stick those underground. JD Vance gave an interview to somebody, I forget who.

where he had a really interesting talk about the vulnerability of our power system here in the U S and how there’s like no backup system. If one part of it goes down, there’s no way to kind of offset that. So, you know, there’s a lot of investing that kind of do there, he said. And, yeah. So, I mean, there’s, you know, I would say infrastructure is kind of, you know, it might be kind of taking that infrastructure spend out of one pocket into another. So it’s not necessarily new spend, but it would be.

Michelle Smalenberger, CFP® (42:21.537)
you

Rob Stoll (42:39.21)
I think a little bit more focused on addressing the real needs that we have.

Michelle Smalenberger, CFP® (42:43.723)
Mm-hmm. Yeah. No, that’s good. The second one, the second one we’re going to talk about, this is kind of a big one, Social Security. What’s going to happen to my Social Security benefits? And what’s interesting is these are not tied at all to spending because they are in a separate pot, not to be touched when needed or anything like that. Touch on that a little bit. Social Security, what do you expect? We know it needs reformed. Are we going to see that, do you think?

Rob Stoll (42:45.942)
Yep.

Rob Stoll (42:49.974)
Yeah.

Rob Stoll (43:06.315)
Yeah.

Rob Stoll (43:11.006)
Yeah, that I, and this is just me talking. This is not like consensus at all. High level social security, the trust fund is going to run out in about 10 years. And at that point, what that means is if nothing is done to shore up the system, then social security benefits will get cut about 25%. So that is clearly not a scenario that anyone of any political stripe wants to see happen.

Michelle Smalenberger, CFP® (43:14.889)
Yeah, right.

Rob Stoll (43:40.788)
I put 0 % odds that that’ll ever happen. The only question is when does it get fixed? I think the consensus and the obvious answer to that is it will get fixed at 11.59 PM the day before it’s going to run out. That’s just the way Congress has worked for a long time, where they just wait until the last possible minute to do something about it.

I think there is potential though, as part of, you know, we’ll get into this a little bit more, just government reform and, you know, tax policy and kind of right sizing other parts of the government. I think there, I think a surprise, a positive surprise could be that social security is kind of put on solid footing during the second term. The reason why I think that is because

You know, it has to get dealt with at some point. And, you know, if I’m President Trump and I’m looking at my legacy, he got his tax cuts in the first term. If he can get out of his second term saying he, you know, quote unquote, save Social Security, that’s that’s a really big deal. And, you know, I don’t think we should ever minimize how presidents think about their legacy. They want a good legacy and they want to have signature things that they can point to after they’re gone.

Michelle Smalenberger, CFP® (44:50.455)
Yeah.

Rob Stoll (45:03.806)
So I think, you know, it is possible that Social Security does get shored up. I don’t know what that would look like. That would almost certainly in my mind, entail higher payroll taxes because they’re going to cut benefits. you know, I don’t really think they’re going to raise the retirement age either because the life expectancy from the last major reform in the early 80s to today is up a couple of years, but not

the same amount that it was from like 1935 through 1982, the last time it was reformed. So I don’t see like that happening, but there will have to be some, you know, either higher payroll taxes or the wage limit, which is, you know, currently under $200,000. That could go up so that more people, high income earners are subject to that. So, you know, again, this is highly speculative on my part, but

Michelle Smalenberger, CFP® (45:37.869)
Yeah.

Michelle Smalenberger, CFP® (46:02.275)
Yeah.

Rob Stoll (46:02.752)
You know, I think Social Security would be an obvious, you know, if I’m in Trump shoes and thinking about my legacy, that would be a very obvious thing to kind of try to fix.

Michelle Smalenberger, CFP® (46:13.907)
Yeah. Well, politically speaking, one of the benefits could be you set your party up really well, that in the future they don’t have to deal with this come their reelections. And that works for both sides, Republicans and Democrats. You’re not going into a reelection or an election for those House and Senate seats.

coming off of something bad done or not done and now promising to fix it when you’re one of a group trying to get something passed. So it could actually set, and this is the political part of it, could actually set, if he’s wanting to set his party up well, that they don’t have to battle through that in the future. So it’s interesting, yeah, yeah.

Rob Stoll (46:35.009)
Mm-hmm.

Rob Stoll (46:49.034)
Yeah, I mean, it’s really frustrating because I mean, both sides accuse the other of wanting to cut Social Security. It is never ever, ever, ever going to get cut ever. So, you know, it’s just like, you know, can we be adults for two seconds? It has to get fixed. It has to get shored up. Let’s just get it done. So, you know, that’s it takes political will to do that and willingness from both sides to do that. But again, I think

Michelle Smalenberger, CFP® (46:55.744)
Yes.

Mm-hmm. Mm-hmm.

Michelle Smalenberger, CFP® (47:07.917)
go.

Michelle Smalenberger, CFP® (47:14.851)
Yep. Yep.

Rob Stoll (47:19.468)
you know, that is potentially possible in a second term for Trump. If not, you know, certainly the issue gets kicked to like 2032 or 33 and then, you know, right at the last second.

Michelle Smalenberger, CFP® (47:33.111)
Yeah, yeah, no, that makes sense. So let’s kind of shift a little bit. So these have been kind of what we think we’ll see. Let’s talk about some challenges. So kind of key challenges to this term maybe or things coming up. What do you see as some of those?

Rob Stoll (47:47.884)
Yeah, I mean, definitely the biggest challenge that we face right now is the budget. I mentioned it before. are the budgets we’re generating right now. You’ve just never seen during peacetime and growing economies like never, ever. The worst you ever really saw was a budget of maybe three percent of gross domestic product. I mean, we’re double that right now. And that’s with unemployment rate and the low fours.

GDP growth and kind of the 3 % range. mean, it’s unprecedented what we’re seeing right now. there are bond markets. If you look at bond performance the last couple of years, it has been pretty bad. And yes, we came off extremely low interest rates in 2020 and early 21. So that obviously had an impact on that. I mean, bonds are increasingly sensitive to

this issue of, what is going to happen with the deficit? And one of the key reasons for that is because the interest costs, as interest rates have gone up, the cost of servicing the debt has just gone vertical. So if you look at what we’re having to spend just to pay interest on debt, it’s higher than Medicare, it’s higher than defend spending, it’s coming up on Social Security. I mean, it’s just outrageous.

how much money is being spent on interest right now. So, you know, I think the big challenge that, you know, any initiative is going to have, and really the biggest challenge we kind of face right now, is what do do with that budget, and how do you do that in the context of where interest rates are? Because interest rates, you can say, we’ll just cut interest rates, and you’ll cut that interest cost for the deficit down, but…

If you start cutting interest rates, inflation can get reignited and then, you know, you have, that’s a big political problem itself. So there is a dance going on between the budget and interest rates and, you know, how that gets resolved in a credible way. You know, I think it’s really going to determine what, you know, what actually does get done in the second term.

Michelle Smalenberger, CFP® (50:05.537)
Mm-hmm. Yeah. I think that’s one of the interesting things that all of these kind of work together, but yet the Fed is supposedly is separate from, you know, the government. So they are not supposed to tell each other what to do. There’s, you know, already talk about that. But that’s the interesting thing is that they’re all kind of separate, but yet intertwined in how they impact each other. So and I think, you know, even in a home budget and a family’s budget, if you’re running in a deficit.

Rob Stoll (50:25.152)
Yep. Yeah.

Michelle Smalenberger, CFP® (50:32.823)
First, have to get it back to neutral. You have to get it back to where you’re actually break even. And then you work on, now we can spend less so that we have a surplus. So it’s really kind of two big steps just to get the interest payments down and then to get to where it should be. So it is, like you said, a lot of work because those are really big numbers that we’re dealing with. So, yeah.

Rob Stoll (50:55.594)
Yeah, yeah. And, you know, again, I mean, when you look at the fact that social security costs are kind of on autopilot, Medicare, the way it’s structured right now is really on autopilot. And defense, you know, you try to cut defense and everybody starts screaming that you’re weak and you’re going to get overrun by China or whatever it is. so it’s like that is that’s why this issue is so big because

the obvious places to kind of go after to rein that spending in are quote unquote untouchable. So, you know, how do you do this? You know, it’s like for all the talk of like, we’re gonna shut down the Department of Education or whatever it is. It’s like, congratulations. That’s like $20 billion a year. So not gonna move the needle. You need wholesale kind of reform of the government to kind of get that.

Michelle Smalenberger, CFP® (51:31.491)
Mm-hmm.

Michelle Smalenberger, CFP® (51:41.668)
Right.

Michelle Smalenberger, CFP® (51:48.951)
Yeah, yeah. think one thing that hopefully, you know, I’m hopeful about is just bringing together people from different sides. I think that’s hopefully one of the things that people are encouraged by is, you know, yes, President Trump, but he has pulled in people, know, liberals, Democrats from the other side. So I’m hopeful that, you know, even just listening to those ideas enough for them to say, yes, get behind this man. I’m hopeful that all of them kind of working together.

is going to bring about solutions that everyone can agree on. So we’ll see. That all has yet to be seen. But hopefully that gives some people some optimism that maybe we’ll see that. Another key challenge I know you’ve kind of mentioned is tariffs. We did see those in the first administration. So let’s talk about that a little bit.

Rob Stoll (52:27.467)
Mm-hmm.

Rob Stoll (52:36.7)
Yeah, yeah. that’s Trump has been extremely vocal about, you know, wanting to get manufacturing back here in the US and the stick that he wants to use is to impose tariffs. And, you know, the consensus amongst economists is, you know, you impose tariffs and that’s going to create a lot of inflation and issues. And there is some, you know, there is some aspect of that. I, you know, I remember

when Trump put on tariffs, steel tariffs. I have a friend who’s a welder and he was telling me steel prices are going through the roof because there’s all these tariffs on it. And he’s passing that cost along to his customer. So, I mean, there is some of that, but I think, I do think, I, at the risk of kind of stepping over my area of expertise is I’ve…

Michelle Smalenberger, CFP® (53:10.381)
Mm-hmm.

Michelle Smalenberger, CFP® (53:31.843)
you

Rob Stoll (53:32.97)
really read through some commentary from people who are actually in logistics. You know, the tariff issue is probably not going to be as big in terms of an inflationary problem is what kind of the, you know, kind of the ivory tower economists are saying. There are a lot of offsets because the reality is companies that are importing are importing at much lower prices than what consumers are getting. So if you throw a

Michelle Smalenberger, CFP® (53:37.793)
Mm-hmm.

Michelle Smalenberger, CFP® (53:50.595)
Thank you.

Rob Stoll (54:02.284)
10 % tariff on something, that’s not increasing the end consumer’s price by 10%. It’s by a fraction of that because the tariff gets paid at the time that good is brought into the country. it’ll be something we just have to kind of watch and see. One positive kind of spin I’ve seen on how this might be approached is

Michelle Smalenberger, CFP® (54:11.341)
to

Rob Stoll (54:31.436)
Trump will announce tariffs, but he’ll give like a two or three year window to a lot of these places, like build manufacturing here in the US and you’ll avoid the tariff and we’ll give you a two to three years to do it. And then you avoid the tariff. And if you don’t, then in year three, the tariff is going to go through. So I think we have to kind of wait and see. mean, there’s a lot of like negative stuff on the airwaves about tariffs. I’m not personally.

Michelle Smalenberger, CFP® (54:35.469)
Mm-hmm.

Michelle Smalenberger, CFP® (54:42.435)
Yeah. Yeah.

Michelle Smalenberger, CFP® (54:51.608)
Go.

Michelle Smalenberger, CFP® (54:59.523)
Hmm.

Rob Stoll (55:00.928)
concern that it’s going to lead to another round of inflation or anything. But, you know, that is certainly something that’s out there.

Michelle Smalenberger, CFP® (55:08.139)
Yeah, no, think those are great just reminders. So we’ll kind of we’ll end with this section, another kind of main section. What I guess what makes this second term unique? We kind of talked about how you had a first term, but then had a break. And now this is his second term. They didn’t run back to back. So what makes this unique?

Rob Stoll (55:26.632)
Yeah, so it’s, you know, and I’m going to kind of paint a blue sky scenario here. I am an optimist and I, know, as much as history tells you not to believe in good things happening in Washington, you know, I like to believe that that is the case sometimes. I think the biggest thing, like if I was to paint a blue sky scenario for what this second term could look like is that there really is a unique

coalition, I think, that we have not seen in prior second terms. Maybe Eisenhower had it, but you go in Reagan to a certain extent. you look at Clinton didn’t have it. G.W. Bush didn’t have it. Obama didn’t have it. But you look at kind of the coalition that this round or this election is a lot different than what it was during the 2016

Election when Trump first ran so back then, you know, it was make America great the MAGA movement. I mean that was That was the movement You look at this year. It’s it’s really kind of an eclectic you have the MAGA movement. Yes but you’ve had a lot of you know, historical libertarians a lot of people in Silicon Valley You know, they’re tend to be libertarian and kind of hands-off

L’Asie Fair, know, Elon Musk being a great example of that. But there’s a lot of other people like that as well, you know, kind of in business, out there doing things and, you know, really focused on efficiency. So you have that is kind of under that fold. But you also have what I call, you know, the Kennedy Democrats, know, which I refer to them as Kennedy Democrats, because if you go back to the 50s, 60s and early 70s,

The Democratic Party was very, you know, pro-America, pro-middle class, but certainly a lot more focused on social issues. And if you look at some of the other people in this kind of coalition, this unity government, as they like to call it, you have Robert F. Kennedy Jr., who was running as, originally running as a Democrat and got kind of boxed out of that, ran as an independent and then eventually joined

Michelle Smalenberger, CFP® (57:45.527)
Mm-hmm.

Rob Stoll (57:52.172)
this coalition. I mean, you have him in there. You have Tulsi from Hawaii is in there and several, you know, a couple other kind of historical Kennedy Democrats that you’d say, you know, 20 years ago, these are solid blue, you know, blue dog Democrats all the way. They’re part of this coalition. So, you know, and I kind of look at, know, what could really go right in the second term is

Michelle Smalenberger, CFP® (57:53.655)
down.

Michelle Smalenberger, CFP® (57:57.601)
Yes.

Rob Stoll (58:19.968)
This is not just Trump and his MAGA minions kind of charge it, know, bull into a China shop. We’re going to blow things up. I mean, there is, I think, a very broad consensus out there right now that the federal government is broken. It needs reform and that we’re running out of time for that reform, really because of these deficits. And you have a group of people in there and, you look at Elon Musk, I know

Michelle Smalenberger, CFP® (58:24.067)
Yeah.

Rob Stoll (58:49.676)
A lot of people don’t like him and I know, you know, there’s a lot of things he does and says that pisses people off. I get it. But, you know, you look at what this guy is doing in space exploration. I mean, he’s running circles around NASA on a budget that’s like a tenth of what NASA spends each year. And, you know, it’s just like it’s him and it’s other people who are kind of out in the industrial, you know, kind of industrial America doing things.

Michelle Smalenberger, CFP® (59:09.144)
Yep.

Rob Stoll (59:19.008)
that if they do kind of, you know, join this Department of Government Efficiency as they’re kind of coining it right now, if you get enough of those people like that in there, then, you know, there could actually be some significant government reform, which would be massively bullish for markets and bonds and stocks. you know, that’s, it’s very blue sky. I get it. Chances are probably less than 10 % of that happening, but

Michelle Smalenberger, CFP® (59:34.221)
you

Rob Stoll (59:48.372)
You know, I think if there’s a time to believe that something like that can happen, this is probably the first time in 30 or 40 years, 40 years, that we really have a shot at doing that.

Michelle Smalenberger, CFP® (59:57.517)
Mm-hmm.

Yeah. Yeah. I think something too that you’ve kind of mentioned is it’s kind of like all levels of government are on the table. So, you know, it’s not just the presidency and that’s something we’ve kind of been talking about, but some of these obvious areas like healthcare and defense kind of streamlining that reforming it at all levels. So, yeah.

Rob Stoll (01:00:19.828)
Yeah. Yeah. And mean, there’s really, you know, so what what are the markers that I’m looking at to kind of indicate whether this blue sky scenario can happen or not? I’m really looking at three cabinet positions, looking at the Treasury Secretary, because whoever that is, going to, you know, they have a lot to deal with because we are issuing a lot of debt each year. And the Treasury Secretary is a very important part of kind of getting the market to buy that debt.

So, you know, Treasury Secretary, Defense Secretary, because like it or not, there are a lot of inefficiencies in the Defense Department that needs to be right-sized to be part of that solution. But you need somebody credible in there. You don’t need a bureaucrat. You need somebody credible in there that can get in and actually execute something like that. And then the third position that I’m really looking at is for the Department of Health and Human Services, because

You know, that is kind of the third big piece of the puzzle here in terms of Medicare spending and just healthcare spending overall. It is a big number. you know, anyone who, you know, goes has gone to the doctor or hospital or, you know, needs to have stuff done. You don’t have to be a Republican or Democrat to realize that it is an extremely inefficient and overly expensive system. And

It’s way more complex than I would ever know how to reform. But again, kind of like defense, if there is somebody credible who can get in there and really start to kind of look at where can we kind of streamline and make things efficient, then that would be an indication as well. So kind of like Treasury, Defense, Health and Human Services, as we kind of see those nominations come out, I think that’ll be

Michelle Smalenberger, CFP® (01:01:52.013)
Yes.

Rob Stoll (01:02:17.204)
the biggest indicator of whether the Trump agenda or this kind of department of government efficiency can actually happen.

Michelle Smalenberger, CFP® (01:02:25.717)
Mm-hmm. Yeah, even people just paying their insurance health insurance premiums and may or may not need it But even just how much they’re paying like even those people, you know realize that something needs to be changed Yeah, so yeah, I think one of the interesting things that as I’ve thought about, know I think a leader any leader who’s saying okay now I’m stepping into this position. There’s you know

Rob Stoll (01:02:38.656)
Yeah. Yep.

Michelle Smalenberger, CFP® (01:02:49.397)
especially for a president, you’re running on all of these policies, you’re running saying you’re going to do these things, and then becomes the reality of, okay, now what do I do? You know, now you’ve been put in this position. And I think that’s something that it to take some of the uncertainty out from, you know, the days ahead and the market does not like uncertainty. So I think these will hopefully be helpful. But I think we’re already starting to see kind of like, okay, day one, here’s what I’m doing or in the first days, here’s what I’m going to do.

And then from there, so I think one of the things, you I just think of is I think we will start to see things quickly, which will start to give insight and potential, you know, seeing action taken or at least the move, the direction we’re headed. So I’m hopeful that that’s going to help kind of give insight early on to people so that we know where we’re headed. The other thing I think about too is just, you know, like you said, these positions, the people that have been kind of a part of this coalition.

What’s hopefully encouraging is these people have been thinking about these things for a long time. So you have, you know, Robert Kennedy Jr. running on a platform of wanting to make America healthy again, you know, that he was already thinking about this already wanting to make that one of his priorities. So now put into a group of people who have other priorities, it really does kind of make this well-rounded group.

And that’s at least encouraging. It’s not someone stepping into this position saying, okay, now what do I want to do? They’ve already been thinking about this and saying, this is what I think is really important. So whether, you know, whether we see that, that’s what we, you know, nobody knows what tomorrow’s gonna bring. But I think those are the things that hopefully are encouraging or give us, you know, that reason for optimism, if there is going to be. So that’s what we’ll, it’ll be interesting to kind of look for.

Rob Stoll (01:04:22.7)
.

Rob Stoll (01:04:35.016)
Yeah, yeah, I the one, know, so I not to throw cold water on everything I just said a moment ago or what you said. You know, the reality is a political reality is getting to that blue sky scenario would probably be chaotic. I mean, we do have a, you know, kind of a federal borg out there that is just so big, so massive, and there’s so many vested interests that need this system in place.

Michelle Smalenberger, CFP® (01:04:41.463)
Yeah. Yeah.

Rob Stoll (01:05:06.229)
They’re not going to just lay down and go away. If that is the direction they’re going, even if you get the right people in there, there is going to be a lot of pushback. And it’s really, really difficult to predict what that would look like. And it could be ugly. I mean, you just don’t know what it looks like, what that could look like. One of the books I read a long time ago that

You know, I think it’s interesting, not a perfect book by any stretch, but by the author Neil Howe, The Fourth Turning, where he really looks at, you know, go back hundreds, thousands of years in history. there is kind of this, you know, semi-regular cycle every 80 years or so, call it, where a society will go through a very tumultuous period.

of change and then, you know, through that kind of a new way, in a positive way, a new way kind of emerges. And, you know, if you read the book, I mean, he wrote this, I think in the late 90s. But if you read the book, I mean, he talked about kind of the 2020s as kind of being the epicenter of that. Because if you go back 80 years from now, we went through World War II. If you go back 60 to 80 years before that, it was a civil war. And if you go back

Michelle Smalenberger, CFP® (01:06:19.16)
Yeah.

Rob Stoll (01:06:27.212)
80 years from that, that was the American Revolution. So, you know, we have actually seen these kind of 80 year cycles happen here in the US. And in all those instances, it was a really, really chaotic and, you know, at sometimes very dark transition from the old way into a new way. My hope is, you know, the experience of the last eight to 10 years was bad enough that maybe that counts as

Michelle Smalenberger, CFP® (01:06:48.056)
Go.

Rob Stoll (01:06:56.896)
that tumultuous period and we’re kind of going to emerge from that. But, you know, I do think that if there is truly a push to streamline government, there’s going to be a lot of forces within government to push back against that because frankly, a lot of people’s paychecks depend on it. And, you know, we’ll see how that turns out. But that would be kind of my caution with all this is the blue sky may come, all the good things and all that, but

Michelle Smalenberger, CFP® (01:06:59.586)
Yeah.

Michelle Smalenberger, CFP® (01:07:22.787)
Mm-hmm.

Rob Stoll (01:07:26.134)
There may be a couple year period where there’s a lot of, you know, lot of chaos in between.

Michelle Smalenberger, CFP® (01:07:30.947)
Mm-hmm, yeah. Yeah. I think that’s really kind of how, when we’re thinking about these things and how they impact clients, you have to be able to see both sides and the potential of what can happen, but also what can stop things from happening or cause things to happen differently. And I think that’s where, in all of these things, as we talk about the Tax Cut and Jobs Act potentially expiring, things like that.

You have to be careful not to make all these rash decisions, act quickly, do things that you wish you wouldn’t have done, because when you do those things, you know, if we’re just talking about estate planning, you could set up all of these things that you might be thinking, well, wait, I didn’t want to retitle those things to be out of my name. Now I can’t take those assets back. So it really has to be tied to your goals and what it is that you are trying to accomplish, where you are at, what state you live in, what matters to your family, you know.

the future generations and existing. So I think, you it just is a reminder of both of these ways that we have to think about things. We have to think about both sides and the potential for the what ifs in either direction. So I think it’s really helpful just to say there’s hope, there’s optimism that we always want to have that, that keeps us moving forward, but also just a reality check. A lot of times of, okay, there’s a lot of levels and layers within each of these pieces. You just take one of them, healthcare.

You know, there’s a lot of details that have to be figured out in order for people to see that now in their pockets and actually at the doctor and to see that impact actually take place. So I think it is just a really good reminder and reality check of we want both. We want that to happen. But we also want it to happen in light of and be done wisely so that, you know, it affects everyone. The outcome is really positive. So, yeah.

Rob Stoll (01:09:20.638)
Yep. Yeah. And that’s the funny thing about investing is as much as people will talk about politics and this and that, at the end of the day, it’s really driven by fundamentals. Like, what are the earnings of these companies doing? And, you know, I’ve looked at this a lot recently just to, you know, you explain why are the Mag 7 doing so well? Well, it’s like their earnings have gone, you know, through the roof the last couple of years. So the stocks have gone through the roof. Why haven’t…

Michelle Smalenberger, CFP® (01:09:28.739)
you

Rob Stoll (01:09:50.91)
Small cap companies done as well. Well, their earnings are stuck from where they were two years ago. So, you know, to your point, I mean, there’s a lot that goes on, but you got to focus on your individual goals and, you know, not lose not lose sight of what really matters. So, I mean, it’s, you know, it’s your personal goals, you know, the things you want to do in retirement or send kids to college, things like that. But even from an investing standpoint, it’s like just, you know,

Michelle Smalenberger, CFP® (01:10:03.299)
We’re

Rob Stoll (01:10:18.986)
Don’t lose sight of what’s going on with the fundamentals, because at the end of the day, that’s what really drives things.

Michelle Smalenberger, CFP® (01:10:25.643)
Yeah, no, I think this has been great. Yeah. Also at the end of the day, when we’re investing for clients, we’re investing so your money is there when you need it. So for us, it’s very important to think about how these things impact the market, how they impact financial planning opportunities, because we could easily say we want to take a bet on this or that, but that isn’t making sure your money is there when you need it, if it doesn’t work out. And so for us, it’s being

very disciplined having a structure in place that we can actually systematically rebalance. And it’s there, it happens regularly, and it’s just repeated over and over. So I think it’s really helpful for people to hear, you know, just some of this background. So yeah, well, thank you so much. Anything you want to share, kind of closing thoughts, how do you want to leave people? I know.

Rob Stoll (01:11:09.163)
Mm-hmm.

Rob Stoll (01:11:14.508)
I mean, there’s a lot here. just, you know, it’s, it’s, it’s, I always have a little trepidation doing these things and, you know, making these big predictions and all that because they’ll probably turn out wrong. But, you know, I think, I think you, I, again, I’m an optimist and I think you just kind of have to be an optimist if there’s ever going to be positive change because

Michelle Smalenberger, CFP® (01:11:28.642)
Okay.

Rob Stoll (01:11:42.1)
If you just believe that things are stuck in the way they are, that’s exactly what you’re going to get. So, you know, it’s, it’s, would just encourage everyone. know it’s a tough election for a lot of people and you know, it’s, it’s, but there is another day we’ve gone through a lot of this in the history of the U S and stocks have generated nine to 10 % returns and bonds have generated 45 % returns over decades and decades and decades. So

You know, I would just, you know, just remind people not to let emotions kind of guide the reality of, you know, just the day-to-day things you need to do.

Michelle Smalenberger, CFP® (01:12:21.256)
Yeah. Well, thank you so much, Rob. I feel like this has been so helpful. I know I’ve enjoyed it because I always enjoy talking about these things. So yeah. So thank you so much.

Rob Stoll (01:12:27.926)
Mm-hmm. Yep, no problem. Love it.

Michelle Smalenberger, CFP® (01:12:33.319)
All right. Well, with that, our episode comes to a close. Thank you, Rob, for sharing your expertise and perspective with us. And thank you for listening. We post new episodes every other week. You can subscribe to our podcast or follow us on social media so you never miss a conversation. And we’ll talk to you in the next episode.

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