Trump’s Second Term: What Might We Expect?

By John Grady, president of the board, ADISA
Donald Trump took the oath of office for the second time, making him only the second president to serve non-consecutive terms. With Trump’s election, plus Republican control of both chambers of Congress, the alternative investments landscape is likely to shift significantly over the next four years.
Potential Regulatory Shifts and Tax Cuts
One of the most immediate effects of Trump’s presidency is the resignation of U.S. Securities and Exchange Commission Chair Gary Gensler, which closely follows the recent resignation of SEC Commissioner Jamie Lizárraga and the cancellation of the vote to renominate SEC Commissioner Caroline Crenshaw. I previously stated in my post-election analysis for the Alternative & Direct Investment Securities Association, i.e., ADISA, that it was unlikely that Gensler would stay on, and he shortly after announced his resignation, as has been customary for SEC chairs during a transition of power. With Gensler’s resignation, President Trump will have three empty seats to fill, most likely creating another Republican majority in the SEC.
Republican Commissioner Mark Uyeda has been named acting chair, and Trump has said that he will nominate former SEC Commissioner Paul Atkins to replace Gensler on a permanent basis. Atkins has been critical of the SEC’s approach to enforcement issues as well as certain rulemakings in the past. Atkins must be approved by the Senate, but overall, a second Trump term may lead to a relative relaxation in the pace and substance of regulatory actions and standards, as compared to Chair Gensler’s tenure.
Rules that were included on the SEC’s spring 2024 regulatory agenda that may be reworked or perhaps even removed include the considerations of disclosures around ESG investing and certain private market reforms, i.e., rulemakings related to Regulation D and Form D improvements. Similarly, it may be likely that any rules related to the safeguarding of assets may be updated and that the re-proposed Open-End Fund Liquidity Risk Management Program rule may not be adopted. It also seems likely that the Conflicts of Interest Associated With the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers rule will be adopted in a very different form or possibly not reproposed at all.
The U.S. Department of Labor’s effort to update and amend the so-called “fiduciary rule” has been more or less stopped in its tracks. Set to take effect on Sept. 23, 2024, the revised rule, including its controversial definition of “investment advice fiduciary,” encountered much opposition and was delayed by two separate Texas district courts. The first Trump administration rolled back proposed changes to the fiduciary definition made in the DoL’s 2016 fiduciary rule initiative, which was vacated in 2018. It is quite possible that the same thing will happen again, but we are waiting on some judicial and agency developments to occur before we know for sure.
The SEC’s accredited investor definition may also be poised for change in the new term. In 2020, Trump-era regulators updated the definition to include “knowledgeable employees” and individuals with specific professional certifications. More recently, the House passed the Expanding Access to Capital Act in March 2024 as well as other bills intended to make broad-based changes in the definition. These legislative initiatives aimed, inter alia, to allow more investors access to private offerings, provided that they met certain new enumerated conditions. The Senate never took up these bills, but that could happen in the near future.
Additionally, one of the most immediate impacts of Trump’s first presidency came in the form of the Tax Cuts and Jobs Act, or TCJA, passed in late 2017. Though many portions of the law are set to expire in 2025, with Trump back in office and a Republican majority in the Senate and House, it appears very possible that those portions may be renewed.
The TCJA dramatically reshaped the corporate tax environment, cutting the corporate tax rate from 35% to 21%, and Trump has stated that he hopes to further lower the tax rate to 15%. This tax cut would be particularly beneficial to companies with high capital expenditures, which are often targeted by private equity and venture capital funds. It could also support a surge in mergers and acquisitions activity, which could be seen as a boon for distressed asset and other similar funds that target underperforming companies.
One of the most notable provisions of the TCJA was the introduction of opportunity zones, a program designed to provide tax incentives for investment in economically distressed communities. Trump has expressed interest in extending, and potentially expanding, the program through the proposed OZ Transparency Extension and Improvement Act, which would, among other potential benefits, extend the program’s principal benefits for two years. With the Republican trifecta of control, this bill could be advanced through “reconciliation,” an expedited process that avoids the threat of a filibuster and allows passage with only a simple majority.
A Possible Boost for Commercial Real Estate
With the election settled, the commercial real estate sector will benefit from a reduction in uncertainty, and with Trump’s background in real estate, it may be expected that he will favor policies that will support the industry. For example, Trump’s pro-business stance, combined with the Fed’s recent lowering of interest rates, may encourage more frequent buying and selling by all involved.
Trump has expressed a commitment to restoring 100% bonus depreciation for real estate, which would help to incentivize development, while also stating his support for lower capital gains taxes. This would likely increase transaction volume across the sector. President Trump has also traditionally supported 1031 like-kind exchanges – a practice that many real estate professionals see as essential for growth and investment.
Trump has also stated that he plans to create the new “External Revenue Service” and install a blanket tariff of up to 20% on all imports, with a punitive 25% duty on Canadian and Mexican imports and additional tariffs of 60% on Chinese goods. This, combined with Trump’s general America-first rhetoric, could mean another push to reshoring manufacturing jobs and redrawing global supply chains. For industrial real estate, this could present an opportunity, particularly in logistics hubs, warehouses, and last-mile delivery.
Trump has also historically placed an emphasis on energy independence and a pro-fossil fuel agenda. In his victory speech, he stated that the United States has “more liquid gold, oil and gas … than any other country in the world,” and in his inauguration speech, he declared a “national energy emergency” stating, “We will drill, baby, drill.” During his first term, President Trump rolled back many regulations facing the energy industry, such as lifting the restrictions on drilling on federal lands. It seems that Trump may take a similar approach during his second term, and this could support commodities and funds in the oil and gas space.
Prospective Economic Challenges
Of course, not everything that President Trump does will benefit alternative investments. According to a survey by The Wall Street Journal, 68% of economists felt that prices would rise faster under Trump than the democratic nominee and then-vice president, Kamala Harris.
Tariffs on imports could increase construction costs, while tighter immigration policies may reduce the labor pool for construction. These factors could increase wage pressures and overall project costs, driving up pricing for developments. High tariffs could also possibly lead to inflation, forcing the Federal Reserve to raise interest rates again.
Similarly, tax cuts and deregulation could stimulate the commercial real estate market but could also contribute to a ballooning federal deficit, putting additional pressure on interest rates. According to the Committee for a Responsible Federal Budget, Trump approved $8.4 trillion of net 10-year debt (or $4.8 trillion when excluding COVID-related bills and actions), which includes $8.8 trillion of deficit-increasing laws and actions offset by $443 billion of deficit-reducing actions. For comparison, Biden approved $4.3 trillion of net 10-year debt, which includes $6.2 trillion of deficit-increasing action offset by $1.9 trillion of deficit-reducing actions.
As with any administration, Trump’s presidency will most certainly provide opportunities and challenges for the alternative investments industry. Financial professionals and their clients would be wise to monitor the ever-evolving landscape, keep their long-term goals in mind, and adapt as necessary.
With nearly four decades of experience within the investment management industry, John Grady is a noted securities attorney, as well as a member of the ADISA board of directors and the long-time co-chair of its Legislative & Regulatory Committee.