With the 2024 election in the rearview mirror, Republicans are set to have the "trifecta" in Washington—control of the White House and narrow majorities in the Senate and the House of Representatives. Attention is now turning to 2025 and the potential impact of an ambitious legislative and regulatory agenda on investors, advisors, and the markets.

President-elect Donald Trump will return to the White House after a decisive victory on November 5. He swept the seven battleground states for a 312–226 margin in the electoral college and also won the popular vote. Republicans, as expected, were able to win control of the Senate by flipping Montana, Ohio, Pennsylvania, and West Virginia, producing a 53–47 majority next year. And while a trio of House races remain uncalled, Republicans are set to emerge with a narrow majority of three to five seats.

Unified control of Washington means Republicans will be able to push through many of Trump's policy priorities, though lawmakers on Capitol Hill will inevitably make changes to his campaign proposals. And the narrow margins in both chambers of Congress could be difficult to navigate, as it will take just a handful of Republican lawmakers to push back on some proposals and potentially derail legislation. Complicating matters, Trump announced during the first week of the transition that he will nominate three Republican House members to Cabinet-level positions. They will have to resign from the House (one already has done so), leaving vacancies for several weeks until special elections can be held. That will temporarily reduce the majority to a razor-thin margin.

Here's a look at the key policy issues that are most likely to affect investors and the markets in 2025.

A massive tax bill is coming

Washington has long known that a major tax bill was coming in 2025, given that all of the tax cuts from the 2017 Tax Cuts and Jobs Act, passed during the first year of the first Trump administration, are set to expire at the end of next year. Those include the lower individual income tax rates, the higher standard deduction, the increased exemption amount (set to rise to $13.99 million per person in 2025) for the estate tax, and dozens of other provisions. That's the catalyst for a tax bill, but a key question is what else might be included in the package.

President-elect Trump made numerous tax proposals during the campaign, calling for a reduction in the corporate tax rate, an end to the $10,000 cap on the State and Local Tax Deduction (SALT), and the elimination of taxes on tip income, Social Security benefits, and overtime hours, among other proposals. But the price tag is steep. Just extending the expiring provisions will cost an estimated $4.5 trillion, according to the nonpartisan Congressional Budget Office. Adding Trump's campaign proposals would more than double that cost, ballooning the federal budget deficit and the national debt. Deficit hawks on Capitol Hill may balk at the fiscal impact, so choices and compromises may have to be made.

Republicans will try to move quickly on a tax package, likely in the first half of the year, using a parliamentary process known as budget reconciliation to expedite consideration of the bill. Crucially, the process requires only a simple majority vote in both chambers, bypassing the need for a 60-vote supermajority in the Senate. The process was used in 2017 to pass the original tax bill.

A related issue is tariffs. The president-elect has said that he wants to impose across-the-board tariffs of 10% to 20% on all imports and 60% on Chinese imports. But most economists agree that such a broad proposal is likely to trigger a global trade war, creating downside risk for economic growth and earnings while reigniting inflation. With tariffs, the details matter. The amount of the tariffs, which imports they apply to, the countries targeted and how those countries respond—all will be critical factors in determining the broader economic impact. But tariffs do raise revenue—and that revenue could be used to offset some of the cost of the tax bill. Uncertainty about the details of tariffs and tax code changes could be an issue for companies and the markets in the coming months.

Debt ceiling debate will be tricky

The debt ceiling, the Congressionally mandated cap on the total amount of debt the United States can accumulate, was suspended in mid-2023 as part of a bipartisan agreement to avoid default. That agreement expires in January, and the United States will once again be at the debt limit and unable to increase its debt load starting on January 2. The Treasury Department can use cash on hand to pay its obligations and will use "extraordinary measures" to stave off default for a few months, but those steps are temporary. By mid-2025, Congress will have to vote to raise or suspend the debt ceiling. That could be a challenge for Republicans. In the 2023 debate, 71 House Republicans opposed the bill, and a handful of Republicans have never voted for a debt ceiling increase. Democrat votes were needed then to deal with the debt crisis, but Democrats may not be as inclined to help the other party this time. Markets tend to get anxious about when and whether Congress will act on the debt ceiling, and volatility historically increases as the default deadline approaches, so this is an issue for investors to keep an eye on.

Deregulation and what it could mean for advisors

Another expected feature of the Trump administration will be a focus on significant deregulation. Chairs of key regulatory agencies, including Gary Gensler at the Securities and Exchange Commission (SEC) and Rostin Behnam at the Commodity Futures Trading Commission (CFTC), are expected to resign before the inauguration. As of mid-November, the president-elect had not yet named his choices to fill those and other key financial regulatory agency slots. But expect many of the regulatory priorities of the Biden administration to be cast aside. The list of rules likely to be repealed, replaced, or shelved is long, and several directly affect investment advisors.

The SEC is likely to see numerous rules reversed. The controversial rule approved last March to require public companies to disclose more to investors about the risks they face from climate change was paused by the SEC weeks later in the face of an onslaught of legal challenges. Expect the new administration to repeal the rule, along with reversing or repealing several other initiatives related to environmental, social, and governance (ESG) issues. Two rule proposals focusing on RIAs—one dealing with the use of predictive data analytics in investment advice interactions and the other expanding the Custody Rule—were already slated for re-proposal at the SEC and now are almost sure to be shelved entirely. Much of the SEC's ambitious agenda to overhaul the equity market structure may also be put on ice, along with a proposal to require mutual funds to adopt swing pricing.

Also high on the list is the Department of Labor's fiduciary rule. Two different courts halted the rule, which was finalized in April and was supposed to go into effect in September, and it is widely expected to be vacated entirely. The incoming administration will undoubtedly put an end to it if the courts do not—yet another turn in the back-and-forth saga of a rule that was first proposed nearly 15 years ago.

And the cryptocurrency industry is positively giddy with the election result, optimistic that a Trump administration will be far more crypto-friendly. The industry has had an outspoken adversary in Gensler at the SEC, but new heads at that agency and the CFTC are expected to view digital assets more favorably. And there is also a sense that legislation could move through Congress in 2025 to create a regulatory framework for cryptocurrency that further legitimizes digital assets in the broader financial system.

Overall, much of the financial sector expects a lighter regulatory touch in a Trump 2.0 administration.