January has arrived, and with it comes the onset of a new presidential administration. President-elect Trump touted myriad policy proposals during his campaign, but as with any president, making those ideas a reality often proves more difficult than expected. Tariffs offer an example. If applied as envisioned by the president-elect, they would likely shake up many investors’ thoughts on 2025. At the same time, a watered-down version of those initiatives could offer their own set of opportunities. That “either/or” outlook speaks to the case for active investing.
See more: Prepare for 2025’s Ups & Downs With Active Equity Income ETF TEQI
What impact might tariffs have on the broader economy? While a full projection would require more specifics, higher supply chain costs are a place to start. Imports from China, for example, might run up a significantly larger bill than previously. Given how large a role China plays in the global market, that would likely impact all types of business and, of course, consumers.
Tariffs on nearby countries like Canada, too, would have an impact, with Canadian lumber a recently discussed potential target. Many firms could pass those costs along to consumers, but higher overall costs would have market consequences regardless, potentially slowing growth.
Of course, many companies are already preparing for that eventuality. What might upset expectations even more — in a positive way — would be a “tariffs-lite” outcome. In that case, federal deregulation and other policies in that vein might kick off a continued run of market positivity.
Active investing can help investors prepare for either high tariffs or a tamer set of policies therein. Active ETFs can adapt to events faster than their passive peers, an important attribute for the start of a new presidential administration. What’s more, they can also lean more heavily into potential upside if tariffs aren’t as serious. Taken together, investors and advisors may want to revisit active ETFs as this month kicks into gear.
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