Moneybeat: Forecast 2025

MARY REICHARD, HOST: Next up on The World and Everything in It the Monday Moneybeat.

NICK EICHER, HOST: Time now to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. David heads up the wealth management firm The Bahnsen Group. He is here now. Good morning to you, David.

DAVID BAHNSEN: Good morning. Good to be with you.

EICHER: Well David, as promised, we’re going to run through your very extensive white paper on trends you’re expecting in 2025, and obviously we can’t do everything. But I did manage to narrow down to three areas I think will be of interest. I’ll begin with China, US-China trade and tariffs on China. What are you looking for?

BAHNSEN: Well, I do believe that the overall relationship with China, not just the trade component, is a really big issue coming into the new administration. I think it’s going to be different than what President Trump faced when he came into office in 2017.

The consensus view is more of some version of, “Oh, you know, he’s going to really come in and there’s going to be a lot of hostility with China.” 
He got elected in 2016 off of a hawkish view of China—that they were an adversary to the United States in trade, there were unfair trade deals, they were taking advantage of us, they were doing unfair things with their currency.

Then the COVID moment happened, where a lot of the public sentiment had already moved towards Trump’s side of the China discussion. At that point, it became the majority view to see China more adversarially and less as this new 21st century trading partner.

I think that he is coming in right now with a lot of leverage. China’s economy is significantly weaker than it was four years ago, let alone eight years ago. I believe that there is an opportunity for him to actually extract a lot of things from China that are beneficial to U.S. policy interests that would be more friendly than people believe.


President Trump has taken the surprising view that he opposes this ban on TikTok. He invited President Xi to the inauguration. There is significant talk in the Treasury Department with the key people, including the Treasury secretary nominee, Scott Bessent, in a Wall Street Journal op-ed. 
This is hardly secret information that he proposed a “Mar-a-Lago Accord,” named after the famous Plaza Accord of 1986, where Secretary of State James Baker in the Reagan administration brokered a deal at the Plaza Hotel regarding the US dollar in relationship to Germany, France, and Japan. It was a famous global currency deal and they’re talking about a Mar-a-Lago Accord that would represent some sort of change in the way that the Chinese and US dollar exchange rate works.

So I am purposely packing in a lot of things quickly because there’s a lot that’s here. 
And any number of things could go wrong that change what I’m talking about.

But by President Trump not picking Bob Lighthizer to be in his administration, I think he’s signaling more of an intent to get a deal with China. A deal would be beneficial to the United States on a number of different fronts, potentially even involving China and bringing about an end to the Russia-Ukraine war. China certainly has the capability to do that. 
Their friendliness to Putin is one of the only reasons that that war has gone on for three years.

So there’s just a lot there, geopolitically, economically, monetarily, trade, technology. And that is one of my forecasts for 2025, that we are not going to see acrimony and adversarialness, but rather some sort of positive movement.

EICHER: Okay, then David with apologies to Ben Franklin, nothing is certain except death and taxes, how about we skip death and go straight to taxes?

BAHNSEN: Well, sometimes the talk on taxes leads to talk on death, but yes, this is a big deal in 2025.


We’ve already talked a little bit about the complexity of how it’s going to get done. It requires something called a budget reconciliation bill—and it appears it may even require two of those.

There already is right now a debate—Speaker Johnson on one side and Senate Majority Leader John Thune on the other—of how they go about doing it.


President Trump, of course, has never been one for details. He is pretty agnostic about how it gets done. All he cares about is that it gets done. But it makes a difference in what gets done and when it gets done, if they have to do two bills versus one.

My view is that the one campaign promise he has to keep politically is the no-tax-on-tips. I think he won’t even bring up the no-tax-on-Social Security again or the no-tax-on-overtime wages. But the one that was really meaningful electorally—evidenced by the results in Clark County, Nevada as a great example—and the one he repeated about 10 to one compared to the others, was no tax on tips.

So I think he has to extend the tax cuts that are getting ready to sunset from 2017. 
He has to find a way to get no-tax-on-tips in there. They have to find a way to pay for this and all of that can be done.

Then I think there’s even room for a couple of things that are not as big a deal politically, but are a far bigger deal economically. 
If they bring back full 100% business expensing, bonus depreciation, if they get a bigger lift on the SALT (state and local taxes) deduction cap, which is right now set at ten thousand dollars, it used to be unlimited. That is just something that I think they have a chance of doing, which would represent a very significant tax cut to the middle class through the back door if they get that done by lifting that cap to $20,000 or $30,000.

So there’s a couple of little hidden gems out there that could get done and there’s going to be a lot of noise around this, Nick, and that’s what the story 2025 is going to be. 


They’re not coming out in February and getting a tax bill done. And if it has to go through a second reconciliation, it really can’t get done till the end of the year. If it gets wrapped into one big, what we are calling an omnibus bill that’s going to cover some border immigration, trade tax things all at once. 
April is the earliest and it’s very unrealistic. It’s probably more like July. It’s going to be tricky.

But the argument for it is you make people vote for the tax side by connecting it to some of the immigration and border side. 
All the tax things get more complicated, more wonky, and even a little bit more controversial, where like there’s just no political room to not support the immigration stuff he wants to do. So by tethering it together, they corner everyone to have to vote for it.

EICHER: And finally, the Fed and where you see it going …

BAHNSEN: Well, the mortgage rates are one of the big reasons that the Fed, I think, is cornered into having to cut rates—even though there’s this school of thought that says, “Oh, you can’t be cutting rates. 
The economy is doing too well.” You know, that was last Friday, there was all this hubbub and you saw the long term bond yields go way higher.

The stock market dropped because of the “horrible news” that a bunch of new jobs were created in December, far more than expected—and you get back to this thing I sarcastically talk about. When we believe that good news is bad news, there’s something wrong. It stems from the idiotic belief that growth is inflationary and growth is not inflationary. People having jobs is not inflationary.

The Fed right now knows that it’s more optics. It looks better to be cutting rates when there’s bad economic data than it does when there’s good economic data. 
But the real reason they have to cut rates is they know that the housing market is going to become a major problem. I don’t mean housing prices. I mean that there’s nothing that can get done with housing, and there’s so many jobs connected to housing, and there’s so much economic activity connected to housing.

So to have the fed funds rate in the fours and they need to get the mortgage rate down to the fours, that’s really the problem: the mortgage rate is staying up in the sevens.

That’s really where the Fed has to unwind a complicated thing next year. Add to that the jawboning that is certainly going to happen from President Trump if he doesn’t feel the Fed’s cutting quick enough—which they’re going to be going much slower than they originally were intending—then you get a kind of political thing going with it, which is going to complicate it even further.

So I expect there would be a little drama around some of this, but as my white paper at Dividend Cafe talks about, I think the bigger issue, Nick, is going to be not just the Fed rate, but quantitative tightening.

They’re still tightening their balance sheet, meaning they’re reducing the bonds that they’re holding on the balance sheet, they’re pulling liquidity out of the financial system, even as they’re loosening policy with the interest rate.


So this intellectual and policy incoherence I predict comes to an end in 2025.

EICHER: David Bahnsen, founder, managing partner, and chief investment officer of The Bahnsen Group. Check out David’s writing at dividendcafe.com. If you go there, look for that white paper. There’s a link and it will bring up a nicely designed PDF you can print out and read. And get comfortable. It’s about 10,000 words, so plan on an hour if you really want to get into it. It’s worth it.

David, thanks again!

BAHNSEN: Thanks so much, Nick. Great to be with you.

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