The market model is Argentina.
Milei has slashed the government and turned the country around, since his election win, the Argentina stock market is up a whopping 300%.
If DOGE can be just half as effective as Milei (a tall ask), the US is up for a great period of positive change ahead.
Don't expect similar numbers to Argentina, but the broader trend and direction of change may be a useful guide. For example, despite the explosion of value; GDP has struggled and Argentina saw a 50% increase in their unemployment rate through 2024. Slashes across government employees will do that short-term.
Argentina also saw significant inflation growth in early 2024, the first 6 months of Milei's presidency, though it is coming more under control now.
What does this mean for the US?
We still know very little about what and how DOGE will implement change. We still don't know what and how Trump will implement tariffs either.
Two of the main dynamics and themes I am watching are (A) DOGE aggressiveness (speed / ability to execute) and a (B) Tariff Tornado (Trump executing a lot of measurable tariffs quickly).
How each theme may play out in the US:
(A) DOGE is aggressive
= jobs down (short-term)
= FED dovish (cuts rates more)
= Private sector job stimulation action by Trump
= stocks up
= inflation up
(B) Trump Tornado "Category 10"
= inflation up (higher cost of imported goods)
= Dollar up (other currencies devalue)
= FED hawkish (pauses/raises rates)
= Dollar up more
= stocks up
= jobs up (US labor is more competitive)
This is far from certain. Each of these themes interacts with each other. Some forces and effects cancel each other out. How actions are implemented will greatly sway these affects, and change them through time as short-term effects can be quite different to long-term effects.
There's a question mark on rates which could potentially go down (currently expected) or even up over the coming 2 years to manage these forces.
EIther way, it does seem likely that all roads leads to more inflation through in the initial phase of the Trump presidency.
The above dynamics also both lead to stocks higher. This will be compounded by the fact Trump likes to measure success from equities, so he won't allow failure there.
There's a bigger question mark on Bitcoin (as it relates to US policy). If Trump takes any serious action on a Bitcoin Strategic Reserve (BSR) that will have huge positive impacts on Bitcoin. If a BSR falls on the back burner because the above issues are more pressing, things could be more lacklustre. Let's not forget, if there is any tangible inflation increase or stimulatory action (like 2020 and 2021), we can expect Bitcoin to price up accordingly.
Many of these questions will likely be answered in the coming months. It should be an exciting 2025 either way.
